Where Evertz Technologies Limited’s (TSE:ET) Earnings Growth Stands Against Its Industry
Assessing Evertz Technologies Limited’s (TSE:ET) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess ET’s recent performance announced on 30 April 2018 and evaluate these figures to its longer term trend and industry movements.
See our latest analysis for Evertz Technologies
Commentary On ET’s Past Performance
ET’s trailing twelve-month earnings (from 30 April 2018) of CA$53.1m has declined by -23.2% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 0.3%, indicating the rate at which ET is growing has slowed down. Why could this be happening? Let’s examine what’s going on with margins and if the entire industry is feeling the heat.
Revenue growth in the last few years, has been positive, however, earnings growth has been lagging behind meaning Evertz Technologies has been ramping up its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice.
Eyeballing growth from a sector-level, the Canadian electronic industry has been enduring some headwinds over the previous year, leading to an average earnings drop of -23.2%. This is a significant change, given that the industry has constantly been delivering a a strong growth of 14.5% in the previous five years. This growth is a median of profitable companies of 4 Electronic companies in CA including Firan Technology Group, Celestica and Photon Control.
In terms of returns from investment, Evertz Technologies has fallen short of achieving a 20% return on equity (ROE), recording 16.2% instead. However, its return on assets (ROA) of 12.5% exceeds the CA Electronic industry of 7.1%, indicating Evertz Technologies has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Evertz Technologies’s debt level, has declined over the past 3 years from 24.7% to 21.2%.
What does this mean?
Though Evertz Technologies’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that experience a prolonged period of diminishing earnings are going through some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes Evertz Technologies and its peers a riskier investment. You should continue to research Evertz Technologies to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ET’s future growth? Take a look at our free research report of analyst consensus for ET’s outlook.
Financial Health: Are ET’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 April 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.
