Assessing Electrocomponents plc’s (LSE:ECM) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess ECM’s latest performance announced on 30 September 2017 and evaluate these figures to its historical trend and industry movements. View our latest analysis for Electrocomponents
Could ECM beat the long-term trend and outperform its industry?
I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique enables me to analyze many different companies on a more comparable basis, using new information. For Electrocomponents, its most recent trailing-twelve-month earnings is UK£106.80M, which, relative to the prior year’s figure, has escalated by over 100%. Since these values are fairly short-term thinking, I’ve computed an annualized five-year value for ECM’s earnings, which stands at UK£68.91M This suggests that, generally, Electrocomponents has been able to steadily grow its net income over the past few years as well.
What’s enabled this growth? Let’s take a look at if it is merely owing to industry tailwinds, or if Electrocomponents has seen some company-specific growth. In the last few years, Electrocomponents top-line expansion has overtaken earnings and the growth rate of expenses. Though this has led to a margin contraction, it has moderated Electrocomponents’s earnings contraction. Looking at growth from a sector-level, the UK electronic industry has been amplifying average earnings growth of 51.48% in the past year, and a flatter 1.63% over the previous five years. This means that whatever tailwind the industry is benefiting from, Electrocomponents is able to amplify this to its advantage.
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? I suggest you continue to research Electrocomponents to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for ECM’s future growth? Take a look at our free research report of analyst consensus for ECM’s outlook.
- 2. Financial Health: Is ECM’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 September 2017. 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.