Examining NEX Group plc’s (LON:NXG) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess NXG’s latest performance announced on 31 March 2018 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for NEX Group
Did NXG’s recent earnings growth beat the long-term trend and the industry?NXG’s trailing twelve-month earnings (from 31 March 2018) of UK£111.00m has increased by 9.90% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -12.62%, indicating the rate at which NXG is growing has accelerated. What’s enabled this growth? Let’s take a look at if it is only due to an industry uplift, or if NEX Group has seen some company-specific growth.
In the last couple of years, although bottom-line growth has seen a decrease, top-line growth has dropped much faster, resulting in a margin expansion and NEX Group still maintaining profitability. Viewing growth from a sector-level, the UK capital markets industry has been growing its average earnings by double-digit 30.04% over the previous year, and 18.68% over the previous five years. This shows that any tailwind the industry is deriving benefit from, NEX Group has not been able to realize the gains unlike its industry peers.In terms of returns from investment, NEX Group has not invested its equity funds well, leading to a 12.38% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 6.40% is below the GB Capital Markets industry of 8.36%, indicating NEX Group’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for NEX Group’s debt level, has increased over the past 3 years from 4.41% to 12.09%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 129.96% to 56.80% over the past 5 years.
What does this mean?
NEX Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as NEX Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research NEX Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NXG’s future growth? Take a look at our free research report of analyst consensus for NXG’s outlook.
- Financial Health: Is NXG’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.