Today I will examine LendLease Group’s (ASX:LLC) latest earnings update (30 June 2018) and compare these figures against its performance over the past couple of years, in addition to how the rest of LLC’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.
Could LLC beat the long-term trend and outperform its industry?
LLC’s trailing twelve-month earnings (from 30 June 2018) of AU$793m has increased by 4.5% 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 4.8%, indicating the rate at which LLC is growing has slowed down. Why could this be happening? Well, let’s look at what’s going on with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, LendLease Group has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 5.1% is below the AU Real Estate industry of 5.5%, indicating LendLease Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for LendLease Group’s debt level, has declined over the past 3 years from 8.3% to 5.3%.
What does this mean?
LendLease Group’s track record can be a valuable insight into its earnings performance, but it certainly 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? I suggest you continue to research LendLease Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LLC’s future growth? Take a look at our free research report of analyst consensus for LLC’s outlook.
- Financial Health: Are LLC’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 30 June 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 email@example.com.