When Port of Tauranga Limited (NZSE:POT) announced its most recent earnings (31 December 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Port of Tauranga has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see POT has performed.
Could POT beat the long-term trend and outperform its industry?
POT's trailing twelve-month earnings (from 31 December 2019) of NZ$100m has increased by 3.9% 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 6.2%, indicating the rate at which POT 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 experiencing the hit as well.
In terms of returns from investment, Port of Tauranga has fallen short of achieving a 20% return on equity (ROE), recording 8.8% instead. Furthermore, its return on assets (ROA) of 6.6% is below the NZ Infrastructure industry of 6.7%, indicating Port of Tauranga's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Port of Tauranga’s debt level, has declined over the past 3 years from 10% to 9.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 36% to 46% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Port of Tauranga gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Port of Tauranga to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for POT’s future growth? Take a look at our free research report of analyst consensus for POT’s outlook.
- Financial Health: Are POT’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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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