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Evolution Gaming Group AB (publ) (STO:EVO): Has Recent Earnings Growth Beaten Long-Term Trend?

Simply Wall St

Understanding Evolution Gaming Group AB (publ)’s (STO:EVO) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Evolution Gaming Group is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period.

See our latest analysis for Evolution Gaming Group

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

EVO’s trailing twelve-month earnings (from 31 December 2018) of €83m has jumped 34% 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 44%, indicating the rate at which EVO is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the whole industry is facing the same headwind.

OM:EVO Income Statement, March 5th 2019

In terms of returns from investment, Evolution Gaming Group has invested its equity funds well leading to a 51% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 35% exceeds the SE Hospitality industry of 15%, indicating Evolution Gaming Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Evolution Gaming Group’s debt level, has increased over the past 3 years from 48% to 53%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 21% to 4.0% over the past 5 years.

What does this mean?

Evolution Gaming Group’s track record can be a valuable insight into its earnings performance, but it certainly 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 Evolution Gaming Group to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for EVO’s future growth? Take a look at our free research report of analyst consensus for EVO’s outlook.
  2. Financial Health: Are EVO’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 December 2018. 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.