After looking at Swallowfield plc’s (LON:SWL) latest earnings announcement (30 June 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 tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
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Did SWL beat its long-term earnings growth trend and its industry?
SWL’s trailing twelve-month earnings (from 30 June 2018) of UK£3.5m has jumped 38% 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 57%, indicating the rate at which SWL is growing has slowed down. To understand what’s happening, let’s look at what’s occurring with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Swallowfield has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 5.9% is below the GB Personal Products industry of 8.6%, indicating Swallowfield’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Swallowfield’s debt level, has increased over the past 3 years from 5.6% to 14%.
What does this mean?
Though Swallowfield’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Swallowfield to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SWL’s future growth? Take a look at our free research report of analyst consensus for SWL’s outlook.
- Financial Health: Are SWL’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.