Measuring Echo Investment SA’s (WSE:ECH) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess ECH’s recent performance announced on 31 March 2018 and compare these figures to its historical trend and industry movements. See our latest analysis for Echo Investment
Did ECH’s recent earnings growth beat the long-term trend and the industry?
ECH’s trailing twelve-month earnings (from 31 March 2018) of zł300.20m has jumped 14.80% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.09%, indicating the rate at which ECH is growing has accelerated. What’s the driver of this growth? Let’s take a look at whether it is solely owing to an industry uplift, or if Echo Investment has experienced some company-specific growth.
In the past few years, Echo Investment grew its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the PL real estate industry has been growing its average earnings by double-digit 14.80% over the prior year, and 15.98% over the previous five years.
In terms of returns from investment, Echo Investment has not invested its equity funds well, leading to a 17.89% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 7.76% exceeds the PL Real Estate industry of 5.46%, indicating Echo Investment has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Echo Investment’s debt level, has increased over the past 3 years from 0.50% to 6.01%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 108.06% to 94.39% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be variables that are impacting the entire industry thus the high industry growth rate over the same period of time. I suggest you continue to research Echo Investment to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ECH’s future growth? Take a look at our free research report of analyst consensus for ECH’s outlook.
- Financial Health: Is ECH’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 31 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.