When Webcom Group Inc (NASDAQ:WEB) released its most recent earnings update (30 June 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Web.com Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see WEB has performed.
Could WEB beat the long-term trend and outperform its industry?
WEB recently turned a profit of US$49.86m (most recent trailing twelve-months) compared to its average loss of -US$9.97m over the past five years.
In the last couple of years, Web.com Group increased its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Viewing growth from a sector-level, the US internet industry has been growing its average earnings by double-digit 30.91% over the previous year, and 20.71% over the previous five years. This growth is a median of profitable companies of 25 Internet companies in US including Solium Capital, Dragon Victory International and SPS Commerce. This means that any uplift the industry is profiting from, Web.com Group is capable of leveraging this to its advantage.
In terms of returns from investment, Web.com Group has fallen short of achieving a 20% return on equity (ROE), recording 16.52% instead. Furthermore, its return on assets (ROA) of 5.60% is below the US Internet industry of 7.21%, indicating Web.com Group’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Web.com Group’s debt level, has increased over the past 3 years from 2.69% to 4.05%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 573.80% to 213.10% over the past 5 years.
What does this mean?
Though Web.com Group’s past data is helpful, it is only one aspect of my investment thesis. While Web.com Group has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Web.com Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WEB’s future growth? Take a look at our free research report of analyst consensus for WEB’s outlook.
- Financial Health: Are WEB’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 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 email@example.com.