Yahoo Finance Does 888 Holdings plc’s (LON:888) -75.53% Earnings Drop Reflect A Longer Term Trend?
When 888 Holdings plc (LON:888) released its most recent earnings update (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were 888 Holdings’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not 888 actually performed well. Below is a quick commentary on how I see 888 has performed. View out our latest analysis for 888 Holdings
Was 888’s recent earnings decline indicative of a tough track record?
888’s trailing twelve-month earnings (from 31 December 2017) of UK£12.60m has more than halved from UK£51.50m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 5.11%, indicating the rate at which 888 is growing has slowed down. Why is this? Let’s examine what’s going on with margins and whether the entire industry is facing the same headwind.
Revenue growth in the last few years, has been positive, however, earnings growth has fallen behind meaning 888 Holdings has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the UK hospitality industry has been growing, albeit, at a subdued single-digit rate of 3.59% in the past twelve months, and a substantial 11.13% over the last five years. This shows that any near-term headwind the industry is enduring, it’s hitting 888 Holdings harder than its peers.
In terms of returns from investment, 888 Holdings has not invested its equity funds well, leading to a 11.13% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.03% is below the GB Hospitality industry of 6.21%, indicating 888 Holdings’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for 888 Holdings’s debt level, has increased over the past 3 years from 37.59% to 63.60%.
What does this mean?
888 Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a indicator of a structural change, which makes 888 Holdings and its peers a riskier investment. I recommend you continue to research 888 Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for 888’s future growth? Take a look at our free research report of analyst consensus for 888’s outlook.
Financial Health: Is 888’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 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.
