Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess RCM Technologies, Inc.'s (NasdaqGM:RCMT) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
How Well Did RCMT Perform?
RCMT's trailing twelve-month earnings (from 28 December 2019) of US$4.1m has jumped 50% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -19%, indicating the rate at which RCMT is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is solely a result of an industry uplift, or if RCM Technologies has seen some company-specific growth.
In terms of returns from investment, RCM Technologies has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 6.0% exceeds the US Professional Services industry of 5.9%, indicating RCM Technologies has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for RCM Technologies’s debt level, has declined over the past 3 years from 9.1% to 8.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 43% to 107% over the past 5 years.
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 RCM Technologies to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RCMT’s future growth? Take a look at our free research report of analyst consensus for RCMT’s outlook.
- Financial Health: Are RCMT’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 28 December 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 firstname.lastname@example.org. 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.
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