Today I will take a look at United Carpets Group PLC’s (LON:UCG) most recent earnings update (31 March 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the specialty retail industry performed. As an investor, I find it beneficial to assess UCG’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
How Did UCG’s Recent Performance Stack Up Against Its Past?UCG’s trailing twelve-month earnings (from 31 March 2018) of UK£1.28m has declined by -0.16% 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 19.21%, indicating the rate at which UCG is growing has slowed down. Why is this? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is facing the same headwind.
In the last few years, revenue growth has fallen behind which suggests that United Carpets Group’s bottom line has been driven by unmaintainable cost-cutting. Viewing growth from a sector-level, the UK specialty retail industry has been enduring some headwinds in the prior year, leading to an average earnings drop of -6.44%. This is a significant change, given that the industry has constantly been delivering a a solid growth of 16.43% in the last five years. This growth is a median of profitable companies of 24 Specialty Retail companies in GB including Footasylum, Angling Direct and Sports Direct International. This shows that whatever recent headwind the industry is experiencing, United Carpets Group is relatively better-cushioned than its peers.In terms of returns from investment, United Carpets Group has invested its equity funds well leading to a 24.32% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13.52% exceeds the GB Specialty Retail industry of 5.04%, indicating United Carpets Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for United Carpets Group’s debt level, has increased over the past 3 years from 26.09% to 26.32%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 1.14% to 0.057% over the past 5 years.
What does this mean?
Though United Carpets Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. You should continue to research United Carpets Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for UCG’s future growth? Take a look at our free research report of analyst consensus for UCG’s outlook.
- Financial Health: Is UCG’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 pass 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.