For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine FIH group plc’s (LON:FIH) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. View out our latest analysis for FIH group
Was FIH weak performance lately part of a long-term decline?FIH’s trailing twelve-month earnings (from 30 September 2017) of UK£1.73m has declined by -5.58% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 0.81%, indicating the rate at which FIH is growing has slowed down. Why could this be happening? Let’s examine what’s transpiring with margins and if the entire industry is experiencing the hit as well.
Revenue growth in the past few years, has been positive, however, earnings growth has not been able to catch up, meaning FIH group has been increasing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the UK consumer retailing industry has been growing, albeit, at a unexciting single-digit rate of 9.13% in the previous year, and a flatter 0.81% over the past half a decade. This means whatever tailwind the industry is benefiting from, FIH group has not been able to reap as much as its industry peers.In terms of returns from investment, FIH group has not invested its equity funds well, leading to a 4.27% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 2.87% is below the GB Consumer Retailing industry of 3.17%, indicating FIH group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for FIH group’s debt level, has declined over the past 3 years from 7.54% to 5.10%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 20.09% to 21.15% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that face a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I recommend you continue to research FIH group to get a better picture of the stock by looking at:
- Financial Health: Is FIH’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.
- Valuation: What is FIH worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether FIH is currently mispriced by the market.
- 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.