For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Enstar Group Limited’s (NASDAQ:ESGR) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
How Did ESGR’s Recent Performance Stack Up Against Its Past?
ESGR’s trailing twelve-month earnings (from 31 March 2019) of US$238m has jumped 16% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -12%, indicating the rate at which ESGR is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is solely because of industry tailwinds, or if Enstar Group has experienced some company-specific growth.
In terms of returns from investment, Enstar Group has fallen short of achieving a 20% return on equity (ROE), recording 4.1% instead. Furthermore, its return on assets (ROA) of 1.5% is below the US Insurance industry of 2.5%, indicating Enstar Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Enstar Group’s debt level, has declined over the past 3 years from 2.1% to 1.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 20% to 23% over the past 5 years.
What does this mean?
Enstar Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. 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 Enstar Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ESGR’s future growth? Take a look at our free research report of analyst consensus for ESGR’s outlook.
- Financial Health: Are ESGR’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 March 2019. This may not be consistent with full year annual report figures.
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