J D Wetherspoon plc's 12% ROE: Better Than Average?

Alright, fellow investors, let's dive into the world of J D Wetherspoon plc (LON:JDW) and its impressive 12% Return on Equity (ROE). But first, let's address the elephant in the room: what exactly is ROE, and why should you care?



ROE is a measure of a company's profitability, showing how much profit it generates with the money shareholders have invested. In other words, it's like asking, "How much bang are we getting for our buck?" A higher ROE means the company is generating more profit relative to the money invested by shareholders.

Now, let's get back to JDW. With a 12% ROE, is it better than average? To answer that, we need to compare it to the industry average and JDW's historical performance.

As you can see from the chart, JDW's 12% ROE is significantly higher than the industry average of around 8%. This suggests that JDW is more efficient at generating profits with the money invested by shareholders compared to its peers.

But what about JDW's historical performance? Well, the company's ROE has been on a rollercoaster ride over the past five years, with a low of around 5% and a high of 12%. This volatility is not uncommon in the hospitality industry, which is heavily influenced by economic conditions and consumer spending.

So, is JDW's 12% ROE better than average? Yes, it is. But is it sustainable? That's the million-dollar question.

To answer that, we need to look at the primary drivers of JDW's ROE: net income and shareholder equity. In 2023, JDW's net income improved by a whopping 209.27%, and its shareholder equity increased by 116.06%. These significant improvements in both metrics contributed to JDW's impressive ROE.

However, it's essential to consider the sustainability of these drivers. While JDW's earnings per share (EPS) excluding extraordinary items increased by 205.79% year on year, the five-year annualized EPS growth rate is -5.96%. This suggests that the recent growth may not be sustainable in the long term.



In conclusion, JDW's 12% ROE is better than the industry average, but its sustainability is uncertain due to the company's volatile historical performance and the mixed signals from its EPS growth rates. As an investor, it's crucial to monitor JDW's performance closely and consider other factors, such as its valuation, cash flow, and competitive position, before making a decision.

Remember, the key to successful investing is to stay informed, diversify your portfolio, and maintain a long-term perspective. Don't be swayed by short-term fluctuations or the latest buzzwords. Instead, focus on understanding the fundamentals and making well-informed decisions based on solid data.

So, is JDW's 12% ROE better than average? Yes, but it's up to you to decide whether it's worth investing in. Happy investing!