Investors with a long-term horizong may find it valuable to assess Finbar Group Limited's (ASX:FRI) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Finbar Group is currently performing.
Despite a decline, did FRI underperform the long-term trend and the industry?
FRI's trailing twelve-month earnings (from 30 June 2019) of AU$11m has declined by -18% 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 -28%, indicating the rate at which FRI is growing has slowed down. What could be happening here? Let's examine what's transpiring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Finbar Group has fallen short of achieving a 20% return on equity (ROE), recording 4.6% instead. Furthermore, its return on assets (ROA) of 2.7% is below the AU Real Estate industry of 6.1%, indicating Finbar Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Finbar Group’s debt level, has declined over the past 3 years from 8.1% to 4.5%.
What does this mean?
Finbar Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. In some cases, companies that face a prolonged period of decline in earnings are going through some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a sign of a structural shift, which makes Finbar Group and its peers a riskier investment. You should continue to research Finbar Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FRI’s future growth? Take a look at our free research report of analyst consensus for FRI’s outlook.
- Financial Health: Are FRI’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 June 2019. 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 firstname.lastname@example.org. 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.