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How Does Great Canadian Gaming Corporation’s (TSE:GC) Earnings Growth Stack Up Against Industry Performance?

For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Great Canadian Gaming Corporation’s (TSE:GC) 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.

View our latest analysis for Great Canadian Gaming

How Did GC’s Recent Performance Stack Up Against Its Past?

GC’s trailing twelve-month earnings (from 31 March 2018) of CA$95.70m has jumped 15.16% 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 27.43%, indicating the rate at which GC is growing has slowed down. To understand what’s happening, let’s take a look at what’s occurring with margins and if the whole industry is experiencing the hit as well.

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In the last few years, revenue growth has fallen behind which indicates that Great Canadian Gaming’s bottom line has been driven by unsustainable cost-cutting. Eyeballing growth from a sector-level, the Canadian hospitality industry has been growing its average earnings by double-digit 23.52% over the previous twelve months, and 23.81% over the previous five years. This growth is a median of profitable companies of 12 Hospitality companies in CA including Recipe Unlimited, Imvescor Restaurant Group and Pizza Pizza Royalty. This means any uplift the industry is enjoying, Great Canadian Gaming has not been able to reap as much as its industry peers.

TSX:GC Income Statement Export August 14th 18
TSX:GC Income Statement Export August 14th 18

In terms of returns from investment, Great Canadian Gaming has invested its equity funds well leading to a 20.52% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.25% exceeds the CA Hospitality industry of 7.65%, indicating Great Canadian Gaming has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Great Canadian Gaming’s debt level, has increased over the past 3 years from 10.89% to 12.35%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 143.31% to 110.29% over the past 5 years.

What does this mean?

Great Canadian Gaming’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Great Canadian Gaming 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 Great Canadian Gaming to get a more holistic view of the stock by looking at:

  1. Financial Health: Are GC’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.

  2. Valuation: What is GC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GC is currently mispriced by the market.

  3. 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 March 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.