Measuring The Sage Group plc’s (LSE:SGE) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess SGE’s recent performance announced on 31 March 2020 and weigh these figures against its long-term trend and industry movements.
Commentary On SGE’s Past Performance
SGE’s trailing twelve-month earnings (from 31 March 2020) of UK£336m has increased by 7.1% 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 13%, indicating the rate at which SGE 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 whole industry is facing the same headwind.
In terms of returns from investment, Sage Group has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.4% exceeds the GB Software industry of 6.8%, indicating Sage Group has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Sage Group’s debt level, has declined over the past 3 years from 23% to 19%.
What does this mean?
Sage Group’s track record can be a valuable insight into its earnings performance, but it certainly 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 suggest you continue to research Sage Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SGE’s future growth? Take a look at our free research report of analyst consensus for SGE’s outlook.
- Financial Health: Are SGE’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2020. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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