Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Speedy Hire Plc's (LSE:SDY) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Were SDY's earnings stronger than its past performances and the industry?
SDY's trailing twelve-month earnings (from 30 September 2019) of UK£25m has jumped 20% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 49%, indicating the rate at which SDY is growing has slowed down. What could be happening here? Well, let's look at what's occurring with margins and if the rest of the industry is feeling the heat.
In terms of returns from investment, Speedy Hire has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 5.8% is below the GB Trade Distributors industry of 7.0%, indicating Speedy Hire's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Speedy Hire’s debt level, has increased over the past 3 years from 4.2% to 9.7%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 44% to 43% over the past 5 years.
What does this mean?
Speedy Hire's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as Speedy Hire gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Speedy Hire to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SDY’s future growth? Take a look at our free research report of analyst consensus for SDY’s outlook.
- Financial Health: Are SDY’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 September 2019. This may not be consistent with full year annual report figures.
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.
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