Measuring Canadian Pacific Railway Limited's (TSX:CP) 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 CP's recent performance announced on 31 December 2019 and weigh these figures against its long-term trend and industry movements.
How Did CP's Recent Performance Stack Up Against Its Past?
CP's trailing twelve-month earnings (from 31 December 2019) of CA$2.4b has jumped 25% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 12%, indicating the rate at which CP is growing has accelerated. What's enabled this growth? Let's take a look at if it is only due to an industry uplift, or if Canadian Pacific Railway has seen some company-specific growth.
In terms of returns from investment, Canadian Pacific Railway has invested its equity funds well leading to a 35% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the CA Transportation industry of 8.7%, indicating Canadian Pacific Railway has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Canadian Pacific Railway’s debt level, has increased over the past 3 years from 14% to 17%.
What does this mean?
Canadian Pacific Railway'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 suggest you continue to research Canadian Pacific Railway to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CP’s future growth? Take a look at our free research report of analyst consensus for CP’s outlook.
- Financial Health: Are CP’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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