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Does Countplus Limited's (ASX:CUP) 27% Earnings Growth Make It An Outperformer?

Simply Wall St

Measuring Countplus Limited's (ASX:CUP) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CUP's recent performance announced on 30 June 2019 and compare these figures to its historical trend and industry movements.

See our latest analysis for Countplus

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

CUP's trailing twelve-month earnings (from 30 June 2019) of AU$1.6m has jumped 27% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -37%, indicating the rate at which CUP is growing has accelerated. What's the driver of this growth? Let's take a look at if it is only owing to an industry uplift, or if Countplus has seen some company-specific growth.

ASX:CUP Income Statement, January 27th 2020

In terms of returns from investment, Countplus has fallen short of achieving a 20% return on equity (ROE), recording 4.8% instead. Furthermore, its return on assets (ROA) of 2.5% is below the AU Professional Services industry of 8.3%, indicating Countplus's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Countplus’s debt level, has declined over the past 3 years from 6.9% to 5.7%.

What does this mean?

Though Countplus's past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn't always indicative of a continued optimistic outlook. There could be variables that are influencing the industry as a whole, hence the high industry growth rate over the same time frame. I recommend you continue to research Countplus to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CUP’s future growth? Take a look at our free research report of analyst consensus for CUP’s outlook.
  2. Financial Health: Are CUP’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.
  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 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.