When Rawlplug SA (WSE:RWL) released its most recent earnings update (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Rawlplug has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see RWL has performed.
Despite a decline, did RWL underperform the long-term trend and the industry?
RWL’s trailing twelve-month earnings (from 31 March 2018) of zł26.9m has declined by -8.5% 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 -7.3%, indicating the rate at which RWL is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and if the whole industry is feeling the heat.
Revenue growth in the last couple of years, has been positive, yet earnings growth has been deteriorating. This means Rawlplug has been growing expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the PL machinery industry has been enduring some headwinds over the last few years, leading to an average earnings drop of -4.4% in the most recent year. This growth is a median of profitable companies of 11 Machinery companies in PL including Famur, Newag and Aztec International. This suggests that whatever headwind the industry is experiencing, it’s hitting Rawlplug harder than its peers.
In terms of returns from investment, Rawlplug has fallen short of achieving a 20% return on equity (ROE), recording 7.4% instead. Furthermore, its return on assets (ROA) of 3.6% is below the PL Machinery industry of 3.9%, indicating Rawlplug’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Rawlplug’s debt level, has increased over the past 3 years from 2.4% to 6.8%.
What does this mean?
Rawlplug’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 volatile earnings, can have many factors impacting its business. You should continue to research Rawlplug to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RWL’s future growth? Take a look at our free research report of analyst consensus for RWL’s outlook.
- Financial Health: Are RWL’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 March 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.