When QinetiQ Group plc (LON:QQ.) released its most recent earnings update (30 September 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well QinetiQ Group has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see QQ. has performed.
Did QQ. perform worse than its track record and industry?
QQ.’s trailing twelve-month earnings (from 30 September 2018) of UK£124m has declined by -10% 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 29%, indicating the rate at which QQ. is growing has slowed down. Why could this be happening? Let’s examine what’s occurring with margins and if the entire industry is experiencing the hit as well.
In terms of returns from investment, QinetiQ Group has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 10% exceeds the GB Aerospace & Defense industry of 6.9%, indicating QinetiQ Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for QinetiQ Group’s debt level, has declined over the past 3 years from 33% to 12%.
What does this mean?
Though QinetiQ Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research QinetiQ Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for QQ.’s future growth? Take a look at our free research report of analyst consensus for QQ.’s outlook.
- Financial Health: Are QQ.’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 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.