Examining G4S plc’s (LON:GFS) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess GFS’s latest performance announced on 31 December 2017 and weigh these figures against its longer term trend and industry movements.
Did GFS’s recent earnings growth beat the long-term trend and the industry?GFS’s trailing twelve-month earnings (from 31 December 2017) of UK£242.00m has jumped 20.40% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 18.67%, indicating the rate at which GFS is growing has accelerated. How has it been able to do this? Let’s see if it is only due to an industry uplift, or if G4S has experienced some company-specific growth.
Over the last couple of years, G4S expanded its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Viewing growth from a sector-level, the UK commercial services industry has been growing, albeit, at a unexciting single-digit rate of 2.49% over the past twelve months, and a substantial 18.72% over the last five years. This growth is a median of profitable companies of 19 Commercial Services companies in GB including AssetCo, Rentokil Initial and Premier Technical Services Group. This suggests that any recent headwind the industry is enduring, G4S is less exposed compared to its peers.In terms of returns from investment, G4S has invested its equity funds well leading to a 30.21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 6.35% exceeds the GB Commercial Services industry of 5.72%, indicating G4S has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for G4S’s debt level, has increased over the past 3 years from 6.27% to 12.22%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as G4S gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research G4S to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GFS’s future growth? Take a look at our free research report of analyst consensus for GFS’s outlook.
- Financial Health: Is GFS’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.