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Does Educational Development Corporation's (NASDAQ:EDUC) 28% Earnings Growth Reflect The Long-Term Trend?

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Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!

Assessing Educational Development Corporation's (NASDAQ:EDUC) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess EDUC's recent performance announced on 28 February 2019 and evaluate these figures to its longer term trend and industry movements.

View our latest analysis for Educational Development

How Did EDUC's Recent Performance Stack Up Against Its Past?

EDUC's trailing twelve-month earnings (from 28 February 2019) of US$6.7m 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 46%, indicating the rate at which EDUC is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and if the rest of the industry is facing the same headwind.

NasdaqGM:EDUC Income Statement, June 18th 2019
NasdaqGM:EDUC Income Statement, June 18th 2019

In terms of returns from investment, Educational Development has invested its equity funds well leading to a 26% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the US Retail Distributors industry of 7.4%, indicating Educational Development has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Educational Development’s debt level, has increased over the past 3 years from 11% to 19%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. While Educational Development has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. You should continue to research Educational Development to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for EDUC’s future growth? Take a look at our free research report of analyst consensus for EDUC’s outlook.

  2. Financial Health: Are EDUC’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 28 February 2019. This may not be consistent with full year annual report figures.

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.

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. Thank you for reading.