Investors with a long-term horizong may find it valuable to assess Energy Action Limited’s (ASX:EAX) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Energy Action is currently performing.
Did EAX beat its long-term earnings growth trend and its industry?
EAX’s trailing twelve-month earnings (from 30 June 2018) of AU$2.6m has jumped 46% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -18%, indicating the rate at which EAX is growing has accelerated. What’s enabled this growth? Let’s see if it is only owing to an industry uplift, or if Energy Action has seen some company-specific growth.
In terms of returns from investment, Energy Action has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 13% exceeds the AU Professional Services industry of 9.5%, indicating Energy Action has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Energy Action’s debt level, has increased over the past 3 years from 20% to 20%.
What does this mean?
Energy Action’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as Energy Action gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Energy Action to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EAX’s future growth? Take a look at our free research report of analyst consensus for EAX’s outlook.
- Financial Health: Are EAX’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 30 June 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 email@example.com.