When HiTech Group Australia Limited (ASX:HIT) released its most recent earnings update (30 June 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how HiTech Group Australia performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see HIT has performed.
Did HIT’s recent earnings growth beat the long-term trend and the industry?
HIT’s trailing twelve-month earnings (from 30 June 2018) of AU$2.6m has jumped 11% 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 51%, indicating the rate at which HIT is growing has slowed down. What could be happening here? Well, let’s look at what’s transpiring with margins and whether the rest of the industry is experiencing the hit as well.
In terms of returns from investment, HiTech Group Australia has invested its equity funds well leading to a 35% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 27% exceeds the AU Professional Services industry of 9.5%, indicating HiTech Group Australia has used its assets more efficiently. However, its return on capital (ROC), which also accounts for HiTech Group Australia’s debt level, has declined over the past 3 years from 54% to 49%.
What does this mean?
HiTech Group Australia’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 recommend you continue to research HiTech Group Australia to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HIT’s future growth? Take a look at our free research report of analyst consensus for HIT’s outlook.
- Financial Health: Are HIT’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.