After reading Tecsys Inc’s (TSE:TCS) most recent earnings announcement (31 January 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Tecsys’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. View out our latest analysis for Tecsys
How Did TCS’s Recent Performance Stack Up Against Its Past?TCS’s trailing twelve-month earnings (from 31 January 2018) of CA$6.92m has jumped 37.17% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 31.19%, indicating the rate at which TCS is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is solely owing to an industry uplift, or if Tecsys has seen some company-specific growth.
Over the last couple of years, Tecsys expanded its bottom line faster than revenue by effectively controlling its costs. This has led to a margin expansion and profitability over time. Looking at growth from a sector-level, the Canadian software industry has been growing, albeit, at a muted single-digit rate of 2.27% in the prior year, and a substantial 22.01% over the past five. This growth is a median of profitable companies of 10 Software companies in CA including Brisio Innovations, Open Text and Quorum Information Technologies. This means whatever recent headwind the industry is enduring, Tecsys is less exposed compared to its peers.In terms of returns from investment, Tecsys has not invested its equity funds well, leading to a 16.50% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 10.97% exceeds the CA Software industry of 7.87%, indicating Tecsys has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Tecsys’s debt level, has increased over the past 3 years from 12.69% to 20.42%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 31.15% to 0.32% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Tecsys has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Tecsys to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TCS’s future growth? Take a look at our free research report of analyst consensus for TCS’s outlook.
- Financial Health: Is TCS’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.