In this article, I will take a look at ESCO Technologies Inc.'s (NYSE:ESE) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of ESE's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Did ESE beat its long-term earnings growth trend and its industry?
ESE's trailing twelve-month earnings (from 30 June 2019) of US$85m has increased by 2.1% 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 18%, indicating the rate at which ESE is growing has slowed down. What could be happening here? Well, let's look at what's transpiring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, ESCO Technologies has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. Furthermore, its return on assets (ROA) of 7.0% is below the US Machinery industry of 7.4%, indicating ESCO Technologies's are utilized less efficiently. However, its return on capital (ROC), which also accounts for ESCO Technologies’s debt level, has increased over the past 3 years from 9.2% to 10%.
What does this mean?
Though ESCO Technologies's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as ESCO Technologies gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research ESCO Technologies to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ESE’s future growth? Take a look at our free research report of analyst consensus for ESE’s outlook.
- Financial Health: Are ESE’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 30 June 2019. This may not be consistent with full year annual report figures.
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