Examining how Regional Express Holdings Limited (ASX:REX) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how Regional Express Holdings is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its airlines industry peers.
See our latest analysis for Regional Express Holdings
Could REX beat the long-term trend and outperform its industry?
REX’s trailing twelve-month earnings (from 30 June 2019) of AU$18m has increased by 3.6% 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 33%, indicating the rate at which REX 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, Regional Express Holdings has fallen short of achieving a 20% return on equity (ROE), recording 8.5% instead. However, its return on assets (ROA) of 6.8% exceeds the AU Airlines industry of 5.9%, indicating Regional Express Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Regional Express Holdings’s debt level, has increased over the past 3 years from 2.7% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 23% to 1.5% over the past 5 years.
What does this mean?
Though Regional Express Holdings’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 suggest you continue to research Regional Express Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for REX’s future growth? Take a look at our free research report of analyst consensus for REX’s outlook.
- Financial Health: Are REX’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 30 June 2019. This may not be consistent with full year annual report figures.
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