Assessing Trade Me Group Limited’s (NZSE:TME) 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 TME’s recent performance announced on 30 June 2018 and evaluate these figures to its long-term trend and industry movements.
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Commentary On TME’s Past Performance
TME’s trailing twelve-month earnings (from 30 June 2018) of NZ$97m has increased by 2.3% 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 4.2%, indicating the rate at which TME is growing has slowed down. What could be happening here? Well, let’s examine what’s occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Trade Me Group has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 11% exceeds the NZ Online Retail industry of 6.2%, indicating Trade Me Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Trade Me Group’s debt level, has increased over the past 3 years from 14% to 16%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 25% to 18% over the past 5 years.
What does this mean?
Though Trade Me Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Trade Me Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Trade Me Group 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 TME’s future growth? Take a look at our free research report of analyst consensus for TME’s outlook.
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Financial Health: Are TME’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.