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Taylor Wimpey plc (LON:TW.): Has Recent Earnings Growth Beaten Long-Term Trend?

Simply Wall St

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Assessing Taylor Wimpey plc's (LON:TW.) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess TW.'s recent performance announced on 31 December 2018 and evaluate these figures to its longer term trend and industry movements.

See our latest analysis for Taylor Wimpey

How Well Did TW. Perform?

TW.'s trailing twelve-month earnings (from 31 December 2018) of UK£657m has jumped 18% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 16%, indicating the rate at which TW. is growing has accelerated. What's enabled this growth? Let's take a look at if it is only owing to industry tailwinds, or if Taylor Wimpey has seen some company-specific growth.

LSE:TW. Income Statement, May 29th 2019

In terms of returns from investment, Taylor Wimpey has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the GB Consumer Durables industry of 10%, indicating Taylor Wimpey has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Taylor Wimpey’s debt level, has increased over the past 3 years from 18% to 22%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 4.4% to 3.6% over the past 5 years.

What does this mean?

Taylor Wimpey'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 Taylor Wimpey gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Taylor Wimpey to get a better picture of the stock by looking at:

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