Three companies reported earnings today on the ASX: Rio Tinto (RIO), Transurban (TCL) and Energy Resources Australia (ERA). Macrobusiness will be reporting on earnings and valuing the key companies throughout the earnings season. Remember to bookmark the overall update here.
Empire Investing will provide a valuation later, our major concern is the variability of returns (Return on Equity fell from 62% to 19% from 2006 to 2008 and climbed to 30% in 2010). At first glance, RIO’s half-year ROE has declined to 25% (based on a normalised period) due to the increased equity position.
Due to the very small Return on Equity (ROE) of approx. 9%, a very high net debt to equity ratio over 100% and the inconsistent earnings history, TCL is considered non-investment grade by Empire Investing.
Disclosure: The author is a Director of a private investment company (Empire Investing Pty Ltd), which has no current interest in the businesses mentioned in this article. The article is not to be taken as investment advice and the views expressed are opinions only. Readers should seek advice from someone who claims to be qualified before considering allocating capital in any investment.