Yahoo Finance With A -16% Earnings Drop, Is Comvita Limited’s (NZSE:CVT) A Concern?
Measuring Comvita Limited’s (NZSE:CVT) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess CVT’s recent performance announced on 30 June 2018 and weigh these figures against its long-term trend and industry movements.
Check out our latest analysis for Comvita
Was CVT’s recent earnings decline indicative of a tough track record?
CVT’s trailing twelve-month earnings (from 30 June 2018) of NZ$8m has declined by -16% 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 18%, indicating the rate at which CVT is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Comvita has fallen short of achieving a 20% return on equity (ROE), recording 4.3% instead. Furthermore, its return on assets (ROA) of 3.6% is below the NZ Personal Products industry of 9.2%, indicating Comvita’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Comvita’s debt level, has declined over the past 3 years from 9.1% to 2.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 44% to 51% over the past 5 years.
What does this mean?
Though Comvita’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that face a drawn out period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and expansion. I recommend you continue to research Comvita to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CVT’s future growth? Take a look at our free research report of analyst consensus for CVT’s outlook.
Financial Health: Are CVT’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 30 June 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 editorial-team@simplywallst.com.
