Examining Unified Factory SA’s (WSE:UFC) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess UFC’s latest performance announced on 31 March 2018 and weigh these figures against its longer term trend and industry movements.
Did UFC beat its long-term earnings growth trend and its industry?UFC’s trailing twelve-month earnings (from 31 March 2018) of zł7.02m has jumped 30.05% 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 55.05%, indicating the rate at which UFC is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the rest of the industry is experiencing the hit as well.
Over the last few years, revenue growth has not been able to catch up, which suggests that Unified Factory’s bottom line has been driven by unmaintainable cost-cutting. Viewing growth from a sector-level, the PL software industry has been growing its average earnings by double-digit 12.85% in the past twelve months, and 22.47% over the past half a decade. This growth is a median of profitable companies of 21 Software companies in PL including Comarch, Bloober Team and 11 bit studios. This shows that any uplift the industry is enjoying, Unified Factory is capable of amplifying this to its advantage.In terms of returns from investment, Unified Factory has not invested its equity funds well, leading to a 17.16% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.79% is below the PL Software industry of 11.20%, indicating Unified Factory’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Unified Factory’s debt level, has increased over the past 3 years from 12.64% to 12.69%.
What does this mean?
Though Unified Factory’s past data is helpful, it is only one aspect of my investment thesis. 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 Unified Factory to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for UFC’s future growth? Take a look at our free research report of analyst consensus for UFC’s outlook.
- Financial Health: Is UFC’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.
- 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.
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 email@example.com.