Measuring Diageo plc's (LSE:DGE) 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 DGE's recent performance announced on 30 June 2019 and compare these figures to its historical trend and industry movements.
How DGE fared against its long-term earnings performance and its industry
DGE's trailing twelve-month earnings (from 30 June 2019) of UK£3.2b has increased by 4.6% 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 8.6%, indicating the rate at which DGE is growing has slowed down. What could be happening here? Well, let's examine what's transpiring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Diageo has invested its equity funds well leading to a 33% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the GB Beverage industry of 5.9%, indicating Diageo has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Diageo’s debt level, has increased over the past 3 years from 13% to 17%.
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? I recommend you continue to research Diageo to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DGE’s future growth? Take a look at our free research report of analyst consensus for DGE’s outlook.
- Financial Health: Are DGE’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 June 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
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