When The North West Company Inc. (TSE:NWC) released its most recent earnings update (31 January 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how North West performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see NWC has performed.
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Commentary On NWC's Past Performance
NWC's trailing twelve-month earnings (from 31 January 2019) of CA$87m has jumped 29% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.0%, indicating the rate at which NWC is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is only because of industry tailwinds, or if North West has seen some company-specific growth.
In terms of returns from investment, North West has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.8% exceeds the CA Consumer Retailing industry of 5.7%, indicating North West has used its assets more efficiently. However, its return on capital (ROC), which also accounts for North West’s debt level, has declined over the past 3 years from 17% to 13%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 57% to 87% over the past 5 years.
What does this mean?
While past data is useful, it 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 suggest you continue to research North West to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NWC’s future growth? Take a look at our free research report of analyst consensus for NWC’s outlook.
- Financial Health: Are NWC’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 January 2019. This may not be consistent with full year annual report figures.
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