In this article, I will take a look at National Express Group PLC's (LON:NEX) most recent earnings update (31 December 2018) and compare these latest figures against its performance over the past few years, along with how the rest of NEX's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
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How Did NEX's Recent Performance Stack Up Against Its Past?
NEX's trailing twelve-month earnings (from 31 December 2018) of UK£136m has increased by 8.5% 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 19%, indicating the rate at which NEX is growing has slowed down. To understand what's happening, let's examine what's occurring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, National Express Group has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 5.1% is below the GB Transportation industry of 5.4%, indicating National Express Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for National Express Group’s debt level, has declined over the past 3 years from 9.3% to 9.1%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 92% to 95% over the past 5 years.
What does this mean?
Though National Express Group's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research National Express Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NEX’s future growth? Take a look at our free research report of analyst consensus for NEX’s outlook.
- Financial Health: Are NEX’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 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.
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