For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on adesso AG (FRA:ADN1) useful as an attempt to give more color around how adesso is currently performing.
Were ADN1’s earnings stronger than its past performances and the industry?
ADN1’s trailing twelve-month earnings (from 30 June 2018) of €14m has jumped 28% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 34%, indicating the rate at which ADN1 is growing has slowed down. What could be happening here? Well, let’s examine what’s going on with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, adesso has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.0% exceeds the DE IT industry of 6.5%, indicating adesso has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for adesso’s debt level, has increased over the past 3 years from 13% to 18%.
What does this mean?
While past data is useful, it 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? You should continue to research adesso to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ADN1’s future growth? Take a look at our free research report of analyst consensus for ADN1’s outlook.
- Financial Health: Are ADN1’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 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.