Yahoo Finance Brickworks Limited (ASX:BKW): Does The Earnings Decline Make It An Underperformer?
For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Brickworks Limited (ASX:BKW) useful as an attempt to give more color around how Brickworks is currently performing.
View our latest analysis for Brickworks
How Well Did BKW Perform?
BKW’s trailing twelve-month earnings (from 31 July 2018) of AU$175m has declined by -5.8% 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 18%, indicating the rate at which BKW is growing has slowed down. Why is this? Let’s examine what’s going on with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, Brickworks has fallen short of achieving a 20% return on equity (ROE), recording 8.5% instead. Furthermore, its return on assets (ROA) of 6.6% is below the AU Basic Materials industry of 7.8%, indicating Brickworks’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Brickworks’s debt level, has increased over the past 3 years from 5.2% to 9.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 20% to 16% over the past 5 years.
What does this mean?
Brickworks’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 unpredictable earnings, can have many factors affecting its business. You should continue to research Brickworks to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BKW’s future growth? Take a look at our free research report of analyst consensus for BKW’s outlook.
Financial Health: Are BKW’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 July 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.
