When Persimmon Plc (LON:PSN) released its most recent earnings update (31 December 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 Persimmon 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 PSN has performed.
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Did PSN's recent earnings growth beat the long-term trend and the industry?
PSN's trailing twelve-month earnings (from 31 December 2018) of UK£886m has jumped 13% 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 22%, indicating the rate at which PSN is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the rest of the industry is feeling the heat.
In terms of returns from investment, Persimmon has invested its equity funds well leading to a 28% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 19% exceeds the GB Consumer Durables industry of 10%, indicating Persimmon has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Persimmon’s debt level, has increased over the past 3 years from 21% to 31%.
What does this mean?
Though Persimmon's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Persimmon gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Persimmon to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PSN’s future growth? Take a look at our free research report of analyst consensus for PSN’s outlook.
- Financial Health: Are PSN’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.
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