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Has First Derivatives plc (LON:FDP) Improved Earnings Growth In Recent Times?

Simply Wall St

For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on First Derivatives plc (AIM:FDP) useful as an attempt to give more color around how First Derivatives is currently performing.

See our latest analysis for First Derivatives

Commentary On FDP's Past Performance

FDP's trailing twelve-month earnings (from 31 August 2019) of UK£14m has jumped 20% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.7%, indicating the rate at which FDP is growing has accelerated. How has it been able to do this? Let's take a look at if it is merely owing to industry tailwinds, or if First Derivatives has seen some company-specific growth.

AIM:FDP Income Statement, February 23rd 2020

In terms of returns from investment, First Derivatives has fallen short of achieving a 20% return on equity (ROE), recording 8.8% instead. Furthermore, its return on assets (ROA) of 5.1% is below the GB Software industry of 5.8%, indicating First Derivatives's are utilized less efficiently. However, its return on capital (ROC), which also accounts for First Derivatives’s debt level, has increased over the past 3 years from 6.7% to 9.4%.

What does this mean?

Though First Derivatives's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research First Derivatives to get a better picture of the stock by looking at:

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

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. Thank you for reading.