Does Vertu Motors plc's (LON:VTU) Past Performance Indicate A Weaker Future?

Simply Wall St

After looking at Vertu Motors plc's (LON:VTU) latest earnings announcement (28 February 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.

View our latest analysis for Vertu Motors

How Did VTU's Recent Performance Stack Up Against Its Past?

VTU's trailing twelve-month earnings (from 28 February 2019) of UK£21m has declined by -17% 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 8.9%, indicating the rate at which VTU is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and whether the whole industry is feeling the heat.

AIM:VTU Income Statement, August 25th 2019

In terms of returns from investment, Vertu Motors has fallen short of achieving a 20% return on equity (ROE), recording 7.4% instead. Furthermore, its return on assets (ROA) of 2.2% is below the GB Specialty Retail industry of 3.7%, indicating Vertu Motors's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Vertu Motors’s debt level, has declined over the past 3 years from 12% to 8.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 3.4% to 24% over the past 5 years.

What does this mean?

Vertu Motors's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I recommend you continue to research Vertu Motors to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for VTU’s future growth? Take a look at our free research report of analyst consensus for VTU’s outlook.
  2. Financial Health: Are VTU’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 28 February 2019. 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.