Yahoo Finance Gazal Corporation Limited (ASX:GZL): Does The -6.44% Earnings Drop Reflect A Longer Term Trend?
When Gazal Corporation Limited (ASX:GZL) released its most recent earnings update (03 February 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Gazal has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see GZL has performed. View out our latest analysis for Gazal
Did GZL perform worse than its track record and industry?
GZL’s trailing twelve-month earnings (from 03 February 2018) of AU$9.31m has declined by -6.44% 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 -6.73%, indicating the rate at which GZL is growing has slowed down. What could be happening here? Let’s examine what’s transpiring with margins and if the rest of the industry is feeling the heat.
In the past couple of years, Gazal has, on average, delivered negative top- and bottom-line growth. As revenues dropped by more, expenses have been slashed in order to sustain margins – not the most sustainable operating activity. Scanning growth from a sector-level, the Australian luxury industry has been growing its average earnings by double-digit 10.05% in the past twelve months, and a more subdued 7.76% over the previous five years. This shows that whatever tailwind the industry is deriving benefit from, Gazal has not been able to realize the gains unlike its industry peers.
In terms of returns from investment, Gazal has not invested its equity funds well, leading to a 9.97% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 7.43% exceeds the AU Luxury industry of 6.50%, indicating Gazal has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Gazal’s debt level, has increased over the past 3 years from 2.25% to 11.86%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 46.27% to 21.42% over the past 5 years.
What does this mean?
Gazal’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 influencing its business. You should continue to research Gazal to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for GZL’s future growth? Take a look at our free research report of analyst consensus for GZL’s outlook.
Financial Health: Is GZL’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 03 February 2018. 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.
