Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Prudential plc’s (LON:PRU) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Did PRU perform worse than its track record and industry?
PRU’s trailing twelve-month earnings (from 30 June 2018) of UK£2.2b has declined by -18% 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 6.7%, indicating the rate at which PRU is growing has slowed down. What could be happening here? Let’s examine what’s occurring with margins and if the entire industry is experiencing the hit as well.
In terms of returns from investment, Prudential has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. Furthermore, its return on assets (ROA) of 0.5% is below the GB Insurance industry of 1.4%, indicating Prudential’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Prudential’s debt level, has declined over the past 3 years from 1.0% to 0.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 109% to 118% over the past 5 years.
What does this mean?
Though Prudential’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Prudential to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PRU’s future growth? Take a look at our free research report of analyst consensus for PRU’s outlook.
- Financial Health: Are PRU’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 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.