Today I will examine PSI Software AG’s (ETR:PSAN) latest earnings update (30 September 2018) and compare these figures against its performance over the past couple of years, in addition to how the rest of PSAN’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.

Check out our latest analysis for PSI Software

How Well Did PSAN Perform?

PSAN’s trailing twelve-month earnings (from 30 September 2018) of US$12m has jumped 28% 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 35%, indicating the rate at which PSAN is growing has slowed down. To understand what’s happening, let’s look at what’s occurring with margins and if the entire industry is feeling the heat.

In terms of returns from investment, PSI Software has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. However, its return on assets (ROA) of 6.5% exceeds the DE Software industry of 4.8%, indicating PSI Software has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for PSI Software’s debt level, has increased over the past 3 years from 7.0% to 10%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 11% to 1.5% over the past 5 years.

What does this mean?

While past data is useful, it 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 PSI Software to get a better picture of the stock by looking at:

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

2. Financial Health: Are PSAN’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 30 September 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 editorial-team@simplywallst.com.