For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Power Financial Corporation (TSE:PWF) useful as an attempt to give more color around how Power Financial is currently performing.
How PWF fared against its long-term earnings performance and its industry
PWF's trailing twelve-month earnings (from 30 June 2019) of CA$2.0b has increased by 2.5% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -1.9%, indicating the rate at which PWF is growing has accelerated. How has it been able to do this? Let's take a look at if it is only attributable to an industry uplift, or if Power Financial has experienced some company-specific growth.
In terms of returns from investment, Power Financial has fallen short of achieving a 20% return on equity (ROE), recording 9.7% instead. Furthermore, its return on assets (ROA) of 0.5% is below the CA Insurance industry of 0.9%, indicating Power Financial's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Power Financial’s debt level, has declined over the past 3 years from 1.1% to 0.9%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 47% to 49% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. You should continue to research Power Financial to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PWF’s future growth? Take a look at our free research report of analyst consensus for PWF’s outlook.
- Financial Health: Are PWF’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.
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 email@example.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.