Assessing Enghouse Systems Limited’s (TSE:ENGH) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess ENGH’s recent performance announced on 31 October 2018 and evaluate these figures to its longer term trend and industry movements.
Did ENGH beat its long-term earnings growth trend and its industry?
ENGH’s trailing twelve-month earnings (from 31 October 2018) of CA$58m has jumped 14% 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 18%, indicating the rate at which ENGH is growing has slowed down. What could be happening here? Well, let’s examine what’s transpiring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Enghouse Systems has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 12% exceeds the CA Software industry of 4.8%, indicating Enghouse Systems has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Enghouse Systems’s debt level, has increased over the past 3 years from 17% to 20%.
What does this mean?
Enghouse Systems’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 recommend you continue to research Enghouse Systems to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ENGH’s future growth? Take a look at our free research report of analyst consensus for ENGH’s outlook.
- Financial Health: Are ENGH’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 October 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 firstname.lastname@example.org.