After reading Società Iniziative Autostradali e Servizi SpA’s (BIT:SIS) most recent earnings announcement (31 December 2017), 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 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. See our latest analysis for Società Iniziative Autostradali e Servizi
Did SIS’s recent earnings growth beat the long-term trend and the industry?SIS’s trailing twelve-month earnings (from 31 December 2017) of €237.76m has jumped 48.79% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -10.20%, indicating the rate at which SIS is growing has accelerated. What’s enabled this growth? Well, let’s take a look at whether it is only attributable to industry tailwinds, or if Società Iniziative Autostradali e Servizi has experienced some company-specific growth.
In the last couple of years, Società Iniziative Autostradali e Servizi top-line expansion has outstripped earnings and the growth rate of expenses. Though this has caused a margin contraction, it has cushioned Società Iniziative Autostradali e Servizi’s earnings contraction. Viewing growth from a sector-level, the IT infrastructure industry has been growing its average earnings by double-digit 25.10% in the previous year, and 18.07% over the past five. This growth is a median of profitable companies of 8 Infrastructure companies in IT including Safe Bag, Ansaldo STS and Atlantia. This suggests that any tailwind the industry is benefiting from, Società Iniziative Autostradali e Servizi is able to leverage this to its advantage.In terms of returns from investment, Società Iniziative Autostradali e Servizi has not invested its equity funds well, leading to a 11.20% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 5.88% exceeds the IT Infrastructure industry of 5.67%, indicating Società Iniziative Autostradali e Servizi has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Società Iniziative Autostradali e Servizi’s debt level, has increased over the past 3 years from 5.12% to 7.48%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 123.85% to 94.76% over the past 5 years.
What does this mean?
Società Iniziative Autostradali e Servizi’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 suggest you continue to research Società Iniziative Autostradali e Servizi to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SIS’s future growth? Take a look at our free research report of analyst consensus for SIS’s outlook.
- Financial Health: Is SIS’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.