After reading Telford Homes Plc’s (LON:TEF) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
How Well Did TEF Perform?
TEF’s trailing twelve-month earnings (from 31 March 2018) of UK£37m has jumped 36% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 23%, indicating the rate at which TEF is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is merely because of an industry uplift, or if Telford Homes has seen some company-specific growth.
In terms of returns from investment, Telford Homes has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. Furthermore, its return on assets (ROA) of 9.0% is below the GB Consumer Durables industry of 11%, indicating Telford Homes’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Telford Homes’s debt level, has increased over the past 3 years from 11% to 19%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 79% to 49% over the past 5 years.
What does this mean?
Though Telford Homes’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Telford Homes gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Telford Homes to get a more holistic view of the stock by looking at:
- Financial Health: Are TEF’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.