When Esker SA (EPA:ALESK) announced its most recent earnings (31 December 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Esker has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see ALESK has performed.
How ALESK fared against its long-term earnings performance and its industry
ALESK's trailing twelve-month earnings (from 31 December 2018) of €8.8m has jumped 31% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 15%, indicating the rate at which ALESK is growing has accelerated. What's the driver of this growth? Let's take a look at whether it is solely because of industry tailwinds, or if Esker has seen some company-specific growth.
In terms of returns from investment, Esker has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the FR Software industry of 5.3%, indicating Esker has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Esker’s debt level, has declined over the past 3 years from 20% to 18%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 7.8% to 27% over the past 5 years.
What does this mean?
Though Esker's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Esker gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Esker to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ALESK’s future growth? Take a look at our free research report of analyst consensus for ALESK’s outlook.
- Financial Health: Are ALESK’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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