U.S. Markets closed

Should A.P. Eagers Limited's (ASX:APE) Recent Earnings Decline Worry You?

Simply Wall St

Examining A.P. Eagers Limited's (ASX:APE) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess APE's latest performance announced on 30 June 2019 and weight these figures against its longer term trend and industry movements.

Check out our latest analysis for A.P. Eagers

How Well Did APE Perform?

APE's trailing twelve-month earnings (from 30 June 2019) of AU$91m has declined by -7.4% 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 5.7%, indicating the rate at which APE is growing has slowed down. What could be happening here? Let's examine what's transpiring with margins and if the entire industry is feeling the heat.

ASX:APE Income Statement, November 11th 2019

In terms of returns from investment, A.P. Eagers has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 5.5% is below the AU Specialty Retail industry of 8.2%, indicating A.P. Eagers's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for A.P. Eagers’s debt level, has declined over the past 3 years from 15% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 103% to 130% over the past 5 years.

What does this mean?

A.P. Eagers's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. You should continue to research A.P. Eagers to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for APE’s future growth? Take a look at our free research report of analyst consensus for APE’s outlook.
  2. Financial Health: Are APE’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 30 June 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.