Measuring Ruralco Holdings Limited’s (ASX:RHL) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess RHL’s recent performance announced on 31 March 2018 and compare these figures to its historical trend and industry movements.
Were RHL’s earnings stronger than its past performances and the industry?RHL’s trailing twelve-month earnings (from 31 March 2018) of AU$26.05m has more than doubled from AU$4.30m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.36%, indicating the rate at which RHL is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is only owing to an industry uplift, or if Ruralco Holdings has experienced some company-specific growth.
The climb in earnings seems to be bolstered by a strong top-line increase overtaking its growth rate of costs. Though this has caused a margin contraction, it has made Ruralco Holdings more profitable. Looking at growth from a sector-level, the Australian retail distributors industry has been growing its average earnings by double-digit 19.80% in the past twelve months, and a more subdued 4.58% over the past five. This growth is a median of profitable companies of stocks internationally, operating in the Retail Distributors industry. I’ve decided to use a global peer group as there’s not enough companies in AU that are considered as appropriate peers, and I wanted to get a broader perspective on the regional growth. Some peers include National Tyre & Wheel, Supply Network and Bapcor. This means whatever tailwind the industry is gaining from, Ruralco Holdings is able to leverage this to its advantage.In terms of returns from investment, Ruralco Holdings has not invested its equity funds well, leading to a 11.05% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.26% is below the AU Retail Distributors industry of 3.91%, indicating Ruralco Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Ruralco Holdings’s debt level, has declined over the past 3 years from 13.34% to 11.02%.
What does this mean?
While past data is useful, it 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? You should continue to research Ruralco Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RHL’s future growth? Take a look at our free research report of analyst consensus for RHL’s outlook.
- Financial Health: Is RHL’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.
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.