After looking at Exco Technologies Limited’s (TSE:XTC) latest earnings announcement (31 December 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
How Well Did XTC Perform?
XTC’s trailing twelve-month earnings (from 31 December 2018) of CA$37m has declined by -7.0% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 7.0%, indicating the rate at which XTC is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Exco Technologies has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 8.4% exceeds the CA Machinery industry of 6.2%, indicating Exco Technologies has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Exco Technologies’s debt level, has declined over the past 3 years from 25% to 16%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 3.5% to 8.1% over the past 5 years.
What does this mean?
Exco Technologies’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. I suggest you continue to research Exco Technologies to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for XTC’s future growth? Take a look at our free research report of analyst consensus for XTC’s outlook.
- Financial Health: Are XTC’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 December 2018. This may not be consistent with full year annual report figures.
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