With 9.4% predicted earnings growth over the next year Exco Technologies Limited (TSX:XTC)’s business doesn’t look like a fast grower. Are you considering investing? Then keep reading. I’m going to investigate the latest data and look into some metrics you shouldn’t overlook. See our latest analysis for XTC
Still some room to grow?
XTC is covered by 5 analysts who by consensus are expecting a 33.1% increase in earnings over the next 3 years. This means that earnings per share are to rise to $1.54 levels.
In the same period revenue is expected to grow from $588 Million to $664 Million in 2020 and net income is predicted to escalate from $48 M to $66 M in 2020, roughly growing 1.4x. Margins are expected to be not high but still acceptable at 9.9% during this time as well.
Is there basis for future growth?
Exco Technologies has outperformed the average growth in earnings of the Capital Goods industry over the past year.
Whilst XTC’s Return on Equity of 18.1% isn’t horrific, it means that the company has underperformed the Capital Goods industry average of 34.42%. This is expected to slightly improve with analysts expecting ROE in 3 years to be 16.3%.
Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.
While Exco Technologies is not a fast growing company, it can still offer very interesting investment opportunities. I recommend you see our latest FREE analysis to find out!
If you are not interested in XTC anymore, you can use our free platform to see my list of over 150 other stocks with a high growth potential.