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.
View our latest analysis for Exco Technologies
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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.