After reading UP Global Sourcing Holdings plc’s (LON:UPGS) most recent earnings announcement (31 January 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether UP Global Sourcing Holdings’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Was UPGS’s recent earnings decline indicative of a tough track record?UPGS’s trailing twelve-month earnings (from 31 January 2018) of UK£3.4m has more than halved from UK£4.9m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 45.8%, indicating the rate at which UPGS is growing has slowed down. What could be happening here? Let’s examine what’s going on with margins and if the rest of the industry is facing the same headwind.
In the past couple of years, revenue growth has not been able to catch up, which indicates that UP Global Sourcing Holdings’s bottom line has been propelled by unsustainable cost-cutting. Viewing growth from a sector-level, the UK retail distributors industry has been relatively flat in terms of earnings growth over the past few years. This growth is a median of profitable companies of 4 Retail Distributors companies in GB including Leeds Group, Headlam Group and Inchcape. This shows that whatever near-term headwind the industry is facing, it’s hitting UP Global Sourcing Holdings harder than its peers.In terms of returns from investment, UP Global Sourcing Holdings has invested its equity funds well leading to a 50.3% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14.8% exceeds the GB Retail Distributors industry of 5.5%, indicating UP Global Sourcing Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for UP Global Sourcing Holdings’s debt level, has increased over the past 3 years from 2.0% to 65.1%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I suggest you continue to research UP Global Sourcing Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for UPGS’s future growth? Take a look at our free research report of analyst consensus for UPGS’s outlook.
- Financial Health: Are UPGS’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 31 January 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.