Want to participate in a short research study? Help shape the future of investing tools and receive a $20 prize!
When Simulations Plus, Inc. (NASDAQ:SLP) released its most recent earnings update (30 November 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Simulations Plus’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not SLP actually performed well. Below is a quick commentary on how I see SLP has performed.
Did SLP’s recent earnings growth beat the long-term trend and the industry?
SLP’s trailing twelve-month earnings (from 30 November 2018) of US$8.8m has jumped 43% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 25%, indicating the rate at which SLP is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is only due to industry tailwinds, or if Simulations Plus has seen some company-specific growth.
In terms of returns from investment, Simulations Plus has invested its equity funds well leading to a 27% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 21% exceeds the US Healthcare Services industry of 7.1%, indicating Simulations Plus has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Simulations Plus’s debt level, has declined over the past 3 years from 27% to 27%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Simulations Plus has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Simulations Plus to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SLP’s future growth? Take a look at our free research report of analyst consensus for SLP’s outlook.
- Financial Health: Are SLP’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 November 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 email@example.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. On rare occasion, data errors may occur. Thank you for reading.