Measuring Leon’s Furniture Limited’s (TSE:LNF) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess LNF’s recent performance announced on 30 September 2018 and compare these figures to its historical trend and industry movements.
Could LNF beat the long-term trend and outperform its industry?
LNF’s trailing twelve-month earnings (from 30 September 2018) of CA$107m has increased by 8.1% 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 11%, indicating the rate at which LNF is growing has slowed down. To understand what’s happening, let’s look at what’s occurring with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, Leon’s Furniture has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 7.0% exceeds the CA Specialty Retail industry of 5.9%, indicating Leon’s Furniture has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Leon’s Furniture’s debt level, has increased over the past 3 years from 11% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 132% to 27% over the past 5 years.
What does this mean?
Leon’s Furniture’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Leon’s Furniture has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Leon’s Furniture to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LNF’s future growth? Take a look at our free research report of analyst consensus for LNF’s outlook.
- Financial Health: Are LNF’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 September 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.