For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Krynicki Recykling Spólka Akcyjna (WSE:KRC) useful as an attempt to give more color around how Krynicki Recykling Spólka Akcyjna is currently performing.
How Did KRC’s Recent Performance Stack Up Against Its Past?
KRC’s trailing twelve-month earnings (from 31 March 2018) of zł8.40m has jumped 18.76% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 20.34%, indicating the rate at which KRC is growing has slowed down. Why could this be happening? Well, let’s examine what’s going on with margins and whether the whole industry is feeling the heat.
Over the last few years, revenue growth has not been able to catch up, which implies that Krynicki Recykling Spólka Akcyjna’s bottom line has been propelled by unmaintainable cost-cutting. Scanning growth from a sector-level, the PL commercial services industry has been growing its average earnings by double-digit 29.78% over the past year, and a less exciting 3.49% over the past five. This growth is a median of profitable companies of 15 Commercial Services companies in PL including Gwarant Agencja Ochrony, Geotrans and Centrum Finansowe. This means whatever uplift the industry is enjoying, Krynicki Recykling Spólka Akcyjna has not been able to gain as much as its industry peers.
In terms of returns from investment, Krynicki Recykling Spólka Akcyjna has not invested its equity funds well, leading to a 10.20% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 5.29% is below the PL Commercial Services industry of 6.12%, indicating Krynicki Recykling Spólka Akcyjna’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Krynicki Recykling Spólka Akcyjna’s debt level, has increased over the past 3 years from 4.87% to 5.99%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 112.18% to 69.60% over the past 5 years.
What does this mean?
Krynicki Recykling Spólka Akcyjna’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Krynicki Recykling Spólka Akcyjna to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for KRC’s future growth? Take a look at our free research report of analyst consensus for KRC’s outlook.
- Financial Health: Are KRC’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 31 March 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 firstname.lastname@example.org.