For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Baby Bunting Group Limited (ASX:BBN) useful as an attempt to give more color around how Baby Bunting Group is currently performing.
Check out our latest analysis for Baby Bunting Group
Commentary On BBN’s Past Performance
BBN’s trailing twelve-month earnings (from 30 June 2019) of AU$12m has jumped 43% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 15%, indicating the rate at which BBN is growing has accelerated. What’s the driver of this growth? Let’s see whether it is only owing to industry tailwinds, or if Baby Bunting Group has experienced some company-specific growth.
In terms of returns from investment, Baby Bunting Group has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 8.2% exceeds the AU Specialty Retail industry of 7.8%, indicating Baby Bunting Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Baby Bunting Group’s debt level, has increased over the past 3 years from 16% to 19%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 13% to 3.2% over the past 5 years.
What does this mean?
Though Baby Bunting Group’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Baby Bunting Group to get a better picture of the stock by looking at:
- Financial Health: Are BBN’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.
- Valuation: What is BBN worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BBN is currently mispriced by the market.
- 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 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.