When Ted Baker Plc’s (LON:TED) announced its latest earnings (11 August 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Ted Baker’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not TED actually performed well. Below is a quick commentary on how I see TED has performed.
Did TED’s recent earnings growth beat the long-term trend and the industry?
TED’s trailing twelve-month earnings (from 11 August 2018) of UK£53m has increased by 6.1% 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 14%, indicating the rate at which TED is growing has slowed down. What could be happening here? Well, let’s examine what’s occurring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Ted Baker has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 12% exceeds the GB Luxury industry of 8.1%, indicating Ted Baker has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Ted Baker’s debt level, has declined over the past 3 years from 29% to 26%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 40% to 65% over the past 5 years.
What does this mean?
Ted Baker’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Ted Baker has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Ted Baker to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TED’s future growth? Take a look at our free research report of analyst consensus for TED’s outlook.
- Financial Health: Are TED’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 11 August 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.