Yahoo Finance With A -4.2% Earnings Drop, Is Savills plc's (LON:SVS) A Concern?
After looking at Savills plc's (LON:SVS) latest earnings announcement (31 December 2018), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Savills's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
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Was SVS's recent earnings decline indicative of a tough track record?
SVS's trailing twelve-month earnings (from 31 December 2018) of UK£77m has declined by -4.2% 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 8.5%, indicating the rate at which SVS is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Savills has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. Furthermore, its return on assets (ROA) of 5.6% is below the GB Real Estate industry of 6.9%, indicating Savills's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Savills’s debt level, has declined over the past 3 years from 23% to 18%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 3.9% to 30% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I recommend you continue to research Savills to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SVS’s future growth? Take a look at our free research report of analyst consensus for SVS’s outlook.
Financial Health: Are SVS’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 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.
