In This Article:
For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on AMA Group Limited (ASX:AMA) useful as an attempt to give more color around how AMA Group is currently performing.
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How Well Did AMA Perform?
AMA’s trailing twelve-month earnings (from 30 June 2018) of AU$15m has declined by -12% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 23%, indicating the rate at which AMA is growing has slowed down. Why is this? Let’s examine what’s transpiring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, AMA Group has fallen short of achieving a 20% return on equity (ROE), recording 9.0% instead. Furthermore, its return on assets (ROA) of 4.4% is below the AU Specialty Retail industry of 7.8%, indicating AMA Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for AMA Group’s debt level, has declined over the past 3 years from 21% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 27% to 52% over the past 5 years.
What does this mean?
AMA Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I recommend you continue to research AMA Group to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for AMA’s future growth? Take a look at our free research report of analyst consensus for AMA’s outlook.
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Financial Health: Are AMA’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.
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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 editorial-team@simplywallst.com.