Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Smartgroup Corporation Ltd's (ASX:SIQ) 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.

Check out our latest analysis for Smartgroup

How Well Did SIQ Perform?

SIQ's trailing twelve-month earnings (from 31 December 2019) of AU$61m has increased by 3.6% 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 34%, indicating the rate at which SIQ is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and whether the rest of the industry is facing the same headwind.

In terms of returns from investment, Smartgroup has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14% exceeds the AU Commercial Services industry of 7.3%, indicating Smartgroup has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Smartgroup’s debt level, has increased over the past 3 years from 14% to 26%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 33% to 22% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. While Smartgroup has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. You should continue to research Smartgroup to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for SIQ’s future growth? Take a look at our free research report of analyst consensus for SIQ’s outlook.

2. Financial Health: Are SIQ’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.

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 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 editorial-team@simplywallst.com. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.