When Intact Financial Corporation’s (TSX:IFC) announced its latest earnings (31 December 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Intact Financial’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not IFC actually performed well. Below is a quick commentary on how I see IFC has performed.
How IFC fared against its long-term earnings performance and its industry
IFC’s trailing twelve-month earnings (from 31 December 2019) of CA$709m has increased by 6.3% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.1%, indicating the rate at which IFC is growing has accelerated. How has it been able to do this? Let’s take a look at if it is merely owing to an industry uplift, or if Intact Financial has seen some company-specific growth.
In terms of returns from investment, Intact Financial has fallen short of achieving a 20% return on equity (ROE), recording 8.6% instead. However, its return on assets (ROA) of 2.5% exceeds the CA Insurance industry of 1.0%, indicating Intact Financial has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Intact Financial’s debt level, has declined over the past 3 years from 5.4% to 5.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 21% to 27% over the past 5 years.
What does this mean?
While past data is useful, it 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? You should continue to research Intact Financial to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for IFC’s future growth? Take a look at our free research report of analyst consensus for IFC’s outlook.
- Financial Health: Are IFC’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 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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