Does NZX Limited’s (NZSE:NZX) Past Performance Indicate A Weaker Future?

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Examining how NZX Limited (NZSE:NZX) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how NZX is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its capital markets industry peers.

View our latest analysis for NZX

How Well Did NZX Perform?

NZX’s trailing twelve-month earnings (from 31 December 2018) of NZ$14m has declined by -4.9% 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 -3.1%, indicating the rate at which NZX is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and whether the entire industry is feeling the heat.

NZSE:NZX Income Statement, February 24th 2019
NZSE:NZX Income Statement, February 24th 2019

In terms of returns from investment, NZX has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.0% exceeds the NZ Capital Markets industry of 7.1%, indicating NZX has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for NZX’s debt level, has increased over the past 3 years from 19% to 20%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Typically companies that experience an extended period of decline in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and growth. I recommend you continue to research NZX to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for NZX’s future growth? Take a look at our free research report of analyst consensus for NZX’s outlook.
  2. Financial Health: Are NZX’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.
  3. 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 December 2018. This may not be consistent with full year annual report figures.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.