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After reading Greggs plc’s (LON:GRG) most recent earnings announcement (30 June 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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.
See our latest analysis for Greggs
Were GRG’s earnings stronger than its past performances and the industry?
GRG’s trailing twelve-month earnings (from 30 June 2018) of UK£61m has jumped 14% 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 16%, indicating the rate at which GRG is growing has slowed down. What could be happening here? Well, let’s examine what’s transpiring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, Greggs has fallen short of achieving a 20% return on equity (ROE), recording 20% instead. However, its return on assets (ROA) of 14% exceeds the GB Hospitality industry of 6.3%, indicating Greggs has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Greggs’s debt level, has declined over the past 3 years from 27% to 26%.
What does this mean?
Greggs’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Greggs has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Greggs to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for GRG’s future growth? Take a look at our free research report of analyst consensus for GRG’s outlook.
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Financial Health: Are GRG’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.