Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Assessing XP Power Limited's (LON:XPP) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess XPP's recent performance announced on 31 December 2018 and evaluate these figures to its long-term trend and industry movements.
How Well Did XPP Perform?
XPP's trailing twelve-month earnings (from 31 December 2018) of UK£30m has increased by 6.7% 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 12%, indicating the rate at which XPP is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, XP Power has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14% exceeds the GB Electrical industry of 6.3%, indicating XP Power has used its assets more efficiently. However, its return on capital (ROC), which also accounts for XP Power’s debt level, has declined over the past 3 years from 26% to 19%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 12% to 46% over the past 5 years.
What does this mean?
While past data is useful, it 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 XP Power to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for XPP’s future growth? Take a look at our free research report of analyst consensus for XPP’s outlook.
- Financial Health: Are XPP’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 email@example.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.