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After looking at Scott Technology Limited’s (NZSE:SCT) latest earnings announcement (31 August 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Scott Technology’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
View our latest analysis for Scott Technology
Did SCT’s recent earnings growth beat the long-term trend and the industry?
SCT’s trailing twelve-month earnings (from 31 August 2018) of NZ$11m has increased by 8.9% 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 25%, indicating the rate at which SCT is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Scott Technology has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. Furthermore, its return on assets (ROA) of 6.3% is below the NZ Machinery industry of 6.9%, indicating Scott Technology’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Scott Technology’s debt level, has increased over the past 3 years from 11% to 14%.
What does this mean?
Though Scott Technology’s past data is helpful, it is only one aspect of my investment thesis. While Scott Technology 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 Scott Technology to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for SCT’s future growth? Take a look at our free research report of analyst consensus for SCT’s outlook.
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Financial Health: Are SCT’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.
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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 August 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.