Technology One Limited (ASX:TNE): Has Recent Earnings Growth Beaten Long-Term Trend?
After looking at Technology One Limited’s (ASX:TNE) latest earnings update (30 September 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
See our latest analysis for Technology One
Commentary On TNE’s Past Performance
TNE’s trailing twelve-month earnings (from 30 September 2018) of AU$51m has jumped 15% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 12%, indicating the rate at which TNE is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at if it is solely owing to industry tailwinds, or if Technology One has experienced some company-specific growth.
In terms of returns from investment, Technology One has invested its equity funds well leading to a 28% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 18% exceeds the AU Software industry of 8.8%, indicating Technology One has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Technology One’s debt level, has increased over the past 3 years from 35% to 36%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 6.1% to 0.002% over the past 5 years.
What does this mean?
Technology One’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 Technology One to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TNE’s future growth? Take a look at our free research report of analyst consensus for TNE’s outlook.
Financial Health: Are TNE’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 September 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
