Does Photo-Me International plc’s (LON:PHTM) Past Performance Indicate A Weaker Future?

Investors with a long-term horizong may find it valuable to assess Photo-Me International plc’s (LON:PHTM) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Photo-Me International is currently performing.

View our latest analysis for Photo-Me International

Was PHTM weak performance lately part of a long-term decline?

PHTM’s trailing twelve-month earnings (from 31 October 2018) of UK£36m has declined by -3.0% 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 13%, indicating the rate at which PHTM is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and if the entire industry is facing the same headwind.

LSE:PHTM Income Statement, March 25th 2019
LSE:PHTM Income Statement, March 25th 2019

In terms of returns from investment, Photo-Me International has invested its equity funds well leading to a 27% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14% exceeds the GB Leisure industry of 7.1%, indicating Photo-Me International has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Photo-Me International’s debt level, has declined over the past 3 years from 30% to 21%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.4% to 42% over the past 5 years.

What does this mean?

Photo-Me International’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 impacting its business. You should continue to research Photo-Me International to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for PHTM’s future growth? Take a look at our free research report of analyst consensus for PHTM’s outlook.
  2. Financial Health: Are PHTM’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.
  3. 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 October 2018. 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.