Examining how KRUK Spólka Akcyjna (WSE:KRU) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how KRUK Spólka Akcyjna is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its consumer finance industry peers.
Was KRU’s recent earnings decline worse than the long-term trend and the industry?
KRU’s trailing twelve-month earnings (from 30 June 2018) of zł267.4m has declined by -24.5% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 24.6%, indicating the rate at which KRU is growing has slowed down. Why could this be happening? Well, let’s look at what’s going on with margins and if the entire industry is feeling the heat.
In the last couple of years, revenue growth has not been able to catch up, which implies that KRUK Spólka Akcyjna’s bottom line has been driven by unmaintainable cost-reductions.
Eyeballing growth from a sector-level, the PL consumer finance industry has been growing its average earnings by double-digit 13.4% over the past year, and 23.0% over the past five. Since the Consumer Finance sector in PL is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as SMS Kredyt Holding, Fast Finance and . This means any tailwind the industry is profiting from, KRUK Spólka Akcyjna has not been able to reap as much as its industry peers.
In terms of returns from investment, KRUK Spólka Akcyjna has fallen short of achieving a 20% return on equity (ROE), recording 16.3% instead. However, its return on assets (ROA) of 9.4% exceeds the PL Consumer Finance industry of 4.9%, indicating KRUK Spólka Akcyjna has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for KRUK Spólka Akcyjna’s debt level, has declined over the past 3 years from 15.1% to 13.3%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I suggest you continue to research KRUK Spólka Akcyjna to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for KRU’s future growth? Take a look at our free research report of analyst consensus for KRU’s outlook.
- Financial Health: Are KRU’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.