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Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Scott Technology Limited’s (NZSE:SCT) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. View our latest analysis for Scott Technology
Did SCT beat its long-term earnings growth trend and its industry?
I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend enables me to analyze many different companies on a similar basis, using new information. For Scott Technology, its most recent earnings (trailing twelve month) is NZ$10.53M, which compared to the prior year’s figure, has moved up by 32.49%. Given that these figures are fairly short-term, I have created an annualized five-year value for Scott Technology’s net income, which stands at NZ$6.22M This shows that, on average, Scott Technology has been able to increasingly improve its earnings over the last few years as well.
What’s enabled this growth? Let’s take a look at if it is solely because of industry tailwinds, or if Scott Technology has seen some company-specific growth. The hike in earnings seems to be bolstered by a substantial top-line increase beating its growth rate of costs. Though this resulted in a margin contraction, it has made Scott Technology more profitable. Inspecting growth from a sector-level, the NZ machinery industry has been growing its average earnings by double-digit 20.02% in the past year, and a less exciting 3.73% over the last five years. This suggests that any tailwind the industry is benefiting from, Scott Technology is capable of amplifying this to its advantage.
What does this mean?
While past data is useful, it 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 recommend you continue to research Scott Technology to get a more holistic view of the stock by looking at:
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Financial Health: Is SCT’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.
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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 28 February 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.