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 TFF Group (ENXTPA:TFF) useful as an attempt to give more color around how TFF Group is currently performing.
Commentary On TFF’s Past Performance
TFF’s trailing twelve-month earnings (from 31 October 2019) of €27m has declined by -20% 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 -1.1%, indicating the rate at which TFF is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, TFF Group has fallen short of achieving a 20% return on equity (ROE), recording 7.6% instead. Furthermore, its return on assets (ROA) of 4.5% is below the FR Packaging industry of 5.1%, indicating TFF Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for TFF Group’s debt level, has declined over the past 3 years from 13% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 29% to 58% over the past 5 years.
What does this mean?
Though TFF Group’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that experience an extended period of diminishing earnings are going through some sort of reinvestment phase However, if the entire industry is struggling to grow over time, it may be a sign of a structural shift, which makes TFF Group and its peers a higher risk investment. I recommend you continue to research TFF Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TFF’s future growth? Take a look at our free research report of analyst consensus for TFF’s outlook.
- Financial Health: Are TFF’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 October 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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