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In this article, I will take a look at Brickworks Limited’s (ASX:BKW) most recent earnings update (31 January 2019) and compare these latest figures against its performance over the past few years, along with how the rest of BKW’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Were BKW’s earnings stronger than its past performances and the industry?
BKW’s trailing twelve-month earnings (from 31 January 2019) of AU$225m has jumped 25% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 21%, indicating the rate at which BKW is growing has accelerated. What’s enabled this growth? Let’s see if it is solely attributable to an industry uplift, or if Brickworks has seen some company-specific growth.
In terms of returns from investment, Brickworks has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 8.1% exceeds the AU Basic Materials industry of 7.0%, indicating Brickworks has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Brickworks’s debt level, has increased over the past 3 years from 2.1% to 2.9%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 19% to 16% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Brickworks 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 Brickworks to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BKW’s future growth? Take a look at our free research report of analyst consensus for BKW’s outlook.
- Financial Health: Are BKW’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 January 2019. 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.