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Examining Ricardo plc's (LON:RCDO) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess RCDO's latest performance announced on 31 December 2018 and compare these figures to its longer term trend and industry movements.
How Well Did RCDO Perform?
RCDO's trailing twelve-month earnings (from 31 December 2018) of UK£19m has declined by -20% 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 2.3%, indicating the rate at which RCDO is growing has slowed down. Why could this be happening? Well, let's look at what's transpiring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Ricardo has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 5.9% is below the GB Professional Services industry of 8.8%, indicating Ricardo's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Ricardo’s debt level, has increased over the past 3 years from 14% to 15%.
What does this mean?
Though Ricardo's past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that endure an extended period of diminishing earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I recommend you continue to research Ricardo to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RCDO’s future growth? Take a look at our free research report of analyst consensus for RCDO’s outlook.
- Financial Health: Are RCDO’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 December 2018. 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.