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ESI Group SA (EPA:ESI): Has Recent Earnings Growth Beaten Long-Term Trend?

For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on ESI Group SA (EPA:ESI) useful as an attempt to give more color around how ESI Group is currently performing.

See our latest analysis for ESI Group

How ESI fared against its long-term earnings performance and its industry

ESI's trailing twelve-month earnings (from 31 January 2019) of €3.3m has jumped 40% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -5.4%, indicating the rate at which ESI is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is merely due to industry tailwinds, or if ESI Group has seen some company-specific growth.

ENXTPA:ESI Income Statement, August 7th 2019
ENXTPA:ESI Income Statement, August 7th 2019

In terms of returns from investment, ESI Group has fallen short of achieving a 20% return on equity (ROE), recording 3.2% instead. Furthermore, its return on assets (ROA) of 1.9% is below the FR Software industry of 4.6%, indicating ESI Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for ESI Group’s debt level, has declined over the past 3 years from 7.8% to 4.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 31% to 43% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Recent positive growth isn't always indicative of a continued optimistic outlook. There may be variables that are impacting the entire industry hence the high industry growth rate over the same time period. I suggest you continue to research ESI Group to get a more holistic view of the stock by looking at:

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

  2. Financial Health: Are ESI’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 31 January 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.

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