Assessing Renishaw plc’s (LSE:RSW) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess RSW’s latest performance announced on 30 June 2017 and evaluate these figures to its historical trend and industry movements. See our latest analysis for Renishaw
How RSW fared against its long-term earnings performance and its industry
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to analyze different companies on a similar basis, using the latest information. Renishaw’s latest twelve-month earnings is £102.9M, which compared to the previous year’s figure, has jumped by a substantial 96.93%. Since these figures may be relatively nearsighted, I’ve estimated an annualized five-year figure for RSW’s net income, which stands at £78.8M. This shows that, on average, Renishaw has been able to increasingly improve its profits over the last couple of years as well.
What’s enabled this growth? Let’s take a look at whether it is solely owing to an industry uplift, or if Renishaw has experienced some company-specific growth. The ascend in earnings seems to be bolstered by a robust top-line increase beating its growth rate of costs. Though this has caused a margin contraction, it has made Renishaw more profitable. Looking at growth from a sector-level, the UK electronic equipment, instruments and components industry has been ramping up average earnings growth of 60.85% in the prior year, and a solid 23.53% over the previous five years. This means that any tailwind the industry is profiting from, Renishaw is capable of leveraging this to its advantage.
What does this mean?
Renishaw’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Renishaw has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Renishaw to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for RSW’s future growth? Take a look at our free research report of analyst consensus for RSW’s outlook.
2. Financial Health: Is RSW’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.