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Was The North West Company Inc.'s (TSE:NWC) Earnings Growth Better Than The Industry's?

Simply Wall St

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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Check out our latest analysis for North West

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.

TSX:NWC Income Statement, May 21st 2019

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:

  1. 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.
  2. 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.
  3. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.