Does dotDigital Group Plc’s (LON:DOTD) Recent Track Record Look Strong?

After looking at dotDigital Group Plc’s (AIM:DOTD) latest earnings update (31 December 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. 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 an important aspect. In this article I briefly touch on my key findings. Check out our latest analysis for dotDigital Group

Commentary On DOTD’s Past Performance

For the purpose of this commentary, I like to use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to assess various companies in a uniform manner using new information. For dotDigital Group, its latest earnings (trailing twelve month) is UK£7.48M, which compared to last year’s figure, has climbed up by 24.12%. Since these figures may be fairly short-term thinking, I’ve computed an annualized five-year figure for dotDigital Group’s earnings, which stands at UK£4.48M This means that, generally, dotDigital Group has been able to consistently improve its profits over the past couple of years as well.

AIM:DOTD Income Statement May 8th 18
AIM:DOTD Income Statement May 8th 18
What’s enabled this growth? Well, let’s take a look at if it is solely owing to an industry uplift, or if dotDigital Group has experienced some company-specific growth. The hike in earnings seems to be driven by a solid top-line increase overtaking its growth rate of expenses. Though this brought about a margin contraction, it has made dotDigital Group more profitable. Eyeballing growth from a sector-level, the UK software industry has been growing its average earnings by double-digit 22.04% in the past twelve months, and 15.27% over the past five years. This suggests that any tailwind the industry is profiting from, dotDigital Group is capable of amplifying this to its advantage.

What does this mean?

dotDigital Group’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 dotDigital Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research dotDigital Group to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for DOTD’s future growth? Take a look at our free research report of analyst consensus for DOTD’s outlook.
  2. Financial Health: Is DOTD’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.
  3. 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 2017. This may not be consistent with full year annual report figures.