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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 Tassal Group Limited’s (ASX:TGR) 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 TGR fared against its long-term earnings performance and its industry
TGR’s trailing twelve-month earnings (from 31 December 2018) of AU$62m has increased by 5.0% 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 8.0%, indicating the rate at which TGR is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, Tassal Group has fallen short of achieving a 20% return on equity (ROE), recording 10.0% instead. However, its return on assets (ROA) of 6.8% exceeds the AU Food industry of 5.4%, indicating Tassal Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Tassal Group’s debt level, has declined over the past 3 years from 11% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 23% to 27% over the past 5 years.
What does this mean?
Though Tassal Group’s past data is helpful, it is only one aspect of my investment thesis. While Tassal Group has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Tassal Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TGR’s future growth? Take a look at our free research report of analyst consensus for TGR’s outlook.
- Financial Health: Are TGR’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 2018. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.