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After reading Victrex plc’s (LON:VCT) most recent earnings announcement (30 September 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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.
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Commentary On VCT’s Past Performance
VCT’s trailing twelve-month earnings (from 30 September 2018) of UK£111m has jumped 11% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.3%, indicating the rate at which VCT is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is merely attributable to an industry uplift, or if Victrex has experienced some company-specific growth.
In terms of returns from investment, Victrex has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 20% exceeds the GB Chemicals industry of 7.5%, indicating Victrex has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Victrex’s debt level, has declined over the past 3 years from 28% to 25%.
What does this mean?
Victrex’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. 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 Victrex to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for VCT’s future growth? Take a look at our free research report of analyst consensus for VCT’s outlook.
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Financial Health: Are VCT’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.
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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.