Does Bodycote plc’s (LON:BOY) Recent Track Record Look Strong?

Simply Wall St

Assessing Bodycote plc’s (LON:BOY) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess BOY’s recent performance announced on 31 December 2018 and evaluate these figures to its longer term trend and industry movements.

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Did BOY’s recent earnings growth beat the long-term trend and the industry?

BOY’s trailing twelve-month earnings (from 31 December 2018) of UK£103m has increased by 6.3% 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 8.4%, indicating the rate at which BOY is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and whether the rest of the industry is facing the same headwind.

LSE:BOY Income Statement, March 24th 2019

In terms of returns from investment, Bodycote has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. However, its return on assets (ROA) of 10% exceeds the GB Machinery industry of 7.0%, indicating Bodycote has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Bodycote’s debt level, has increased over the past 3 years from 15% to 17%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 0.4% to 0.3% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. While Bodycote has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Bodycote to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BOY’s future growth? Take a look at our free research report of analyst consensus for BOY’s outlook.
  2. Financial Health: Are BOY’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.