Understanding ScanSource, Inc.’s (NASDAQ:SCSC) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how ScanSource is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period.
Were SCSC’s earnings stronger than its past performances and the industry?
SCSC’s trailing twelve-month earnings (from 31 December 2018) of US$55m has jumped 27% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -6.7%, indicating the rate at which SCSC is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is solely owing to an industry uplift, or if ScanSource has seen some company-specific growth.
In terms of returns from investment, ScanSource has fallen short of achieving a 20% return on equity (ROE), recording 6.2% instead. Furthermore, its return on assets (ROA) of 3.0% is below the US Electronic industry of 7.1%, indicating ScanSource’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for ScanSource’s debt level, has declined over the past 3 years from 12% to 7.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.7% to 41% over the past 5 years.
What does this mean?
ScanSource’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be variables that are influencing the entire industry thus the high industry growth rate over the same time period. You should continue to research ScanSource to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SCSC’s future growth? Take a look at our free research report of analyst consensus for SCSC’s outlook.
- Financial Health: Are SCSC’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 December 2018. This may not be consistent with full year annual report figures.
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