When London Stock Exchange Group plc (LSE:LSE) released its most recent earnings update (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how London Stock Exchange Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see LSE has performed. View our latest analysis for London Stock Exchange Group

Did LSE beat its long-term earnings growth trend and its industry?

I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess different stocks on a more comparable basis, using new information. For London Stock Exchange Group, its most recent trailing-twelve-month earnings is UK£530.00M, which, relative to last year’s level, has risen by more than double. Since these values are relatively short-term, I have determined an annualized five-year value for LSE’s net income, which stands at UK£277.83M This shows that, on average, London Stock Exchange Group has been able to steadily grow its net income over the past couple of years as well.

What’s the driver of this growth? Let’s take a look at whether it is merely owing to industry tailwinds, or if London Stock Exchange Group has experienced some company-specific growth. Over the past few years, London Stock Exchange Group top-line expansion has outstripped earnings and the growth rate of expenses. Though this brought about a margin contraction, it has softened London Stock Exchange Group’s earnings contraction. Eyeballing growth from a sector-level, the UK capital markets industry has been growing its average earnings by double-digit 24.33% in the past year, and 17.78% over the past five. This means that any tailwind the industry is profiting from, London Stock Exchange Group is capable of amplifying this to its advantage.

What does this mean?

London Stock Exchange Group’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? I suggest you continue to research London Stock Exchange Group to get a more holistic view of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for LSE’s future growth? Take a look at our free research report of analyst consensus for LSE’s outlook.

• 2. Financial Health: Is LSE’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.

• 3. 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 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.