Has Toyota Caetano Portugal SA. (ELI:SCT) Improved Earnings Growth In Recent Times?

In this commentary, I will examine Toyota Caetano Portugal SA.'s (ENXTLS:SCT) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the auto industry performed. As an investor, I find it beneficial to assess SCT’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Toyota Caetano Portugal

Could SCT beat the long-term trend and outperform its industry?

I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to assess various companies on a more comparable basis, using the most relevant data points. For Toyota Caetano Portugal, its latest trailing-twelve-month earnings is €9.05M, which, in comparison to the previous year's figure, has jumped up by 28.57%. Given that these values are somewhat myopic, I have computed an annualized five-year figure for SCT's net income, which stands at €2.66M This suggests that, generally, Toyota Caetano Portugal has been able to increasingly raise its earnings over the past few years as well.

What's the driver of this growth? Let's take a look at if it is only attributable to an industry uplift, or if Toyota Caetano Portugal has experienced some company-specific growth. In the last few years, Toyota Caetano Portugal increased its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the PT auto industry has been growing its average earnings by double-digit 25.54% in the previous twelve months, and 10.16% over the past five. This shows that any uplift the industry is gaining from, Toyota Caetano Portugal is able to amplify this to its advantage.

What does this mean?

Though Toyota Caetano Portugal's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Toyota Caetano Portugal to get a better picture of the stock by looking at:

• 1. Financial Health: Is SCT’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.
• 2. Valuation: What is SCT worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SCT is currently mispriced by the market.
• 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 30 June 2017. This may not be consistent with full year annual report figures.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.