Today I will examine Lindsay Australia Limited's (ASX:LAU) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of LAU's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Did LAU's recent earnings growth beat the long-term trend and the industry?
LAU's trailing twelve-month earnings (from 30 June 2019) of AU$8.9m has jumped 10% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.2%, indicating the rate at which LAU is growing has accelerated. What's enabled this growth? Let's see if it is solely because of industry tailwinds, or if Lindsay Australia has seen some company-specific growth.
In terms of returns from investment, Lindsay Australia has fallen short of achieving a 20% return on equity (ROE), recording 9.4% instead. Furthermore, its return on assets (ROA) of 5.3% is below the AU Transportation industry of 5.8%, indicating Lindsay Australia's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Lindsay Australia’s debt level, has increased over the past 3 years from 7.0% to 9.7%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 32% to 21% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Lindsay Australia gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Lindsay Australia to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LAU’s future growth? Take a look at our free research report of analyst consensus for LAU’s outlook.
- Financial Health: Are LAU’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 2019. This may not be consistent with full year annual report figures.
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