After reading Enprise Group Limited’s (NZSE:ENS) latest earnings update (31 March 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether ENS has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. View our latest analysis for Enprise Group
How Well Did ENS Perform?
For the purpose of this commentary, I like to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend enables me to assess many different companies in a uniform manner using new information. Enprise Group’s most recent earnings is NZ$1M, which, in comparison to the prior year’s level, has dropped by a substantial -48.02%. Given that these values may be fairly myopic, I have computed an annualized five-year value for ENS’s net income, which stands at NZ$0M. This means though earnings growth was negative from the previous year, over the longer term, Enprise Group’s earnings have been increasing on average.
How has it been able to do this? Let’s see whether it is solely because of an industry uplift, or if Enprise Group has experienced some company-specific growth. Over the last few years, Enprise Group grew its bottom line faster than revenue by efficiently controlling its costs. This resulted in a margin expansion and profitability over time. Looking at growth from a sector-level, the NZ software industry has been ramping up growth, more than doubling average earnings over the past twelve months, and a less exciting 9.78% over the previous few years. This suggests that whatever uplift the industry is profiting from, Enprise Group has not been able to realize the gains unlike its average peer.
What does this mean?
Enprise Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies are profitable, but have capricious earnings, can have many factors affecting its business. I recommend you continue to research Enprise Group to get a better picture of the stock by looking at:
1. Financial Health: Is ENS’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.