Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Freightways Limited's (NZSE:FRE) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Commentary On FRE's Past Performance
FRE's trailing twelve-month earnings (from 31 December 2019) of NZ$59m has declined by -7.8% 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 7.8%, indicating the rate at which FRE is growing has slowed down. Why could this be happening? Let's examine what's going on with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, Freightways has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.0% exceeds the NZ Logistics industry of 4.9%, indicating Freightways has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Freightways’s debt level, has declined over the past 3 years from 21% to 14%.
What does this mean?
Though Freightways's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research Freightways to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FRE’s future growth? Take a look at our free research report of analyst consensus for FRE’s outlook.
- Financial Health: Are FRE’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 2019. This may not be consistent with full year annual report figures.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.