Assessing Redrow plc's (LSE:RDW) performance as a company requires looking at more than just a years' earnings data. Below, I will run you through a simple sense check to build perspective on how Redrow is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its consumer durables industry peers.
Did RDW beat its long-term earnings growth trend and its industry?
RDW's trailing twelve-month earnings (from 30 June 2019) of UK£329m has increased by 6.8% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 20%, indicating the rate at which RDW is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Redrow has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the GB Consumer Durables industry of 9.1%, indicating Redrow has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Redrow’s debt level, has increased over the past 3 years from 18% to 22%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 32% to 5.0% over the past 5 years.
What does this mean?
Redrow's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Redrow to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RDW’s future growth? Take a look at our free research report of analyst consensus for RDW’s outlook.
- Financial Health: Are RDW’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.