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After reading Enprise Group Limited’s (NZSE:ENS) most recent earnings announcement (30 September 2017), I found it useful to look back at how the company has performed in the past 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 a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Enprise Group
Was ENS weak performance lately part of a long-term decline?
I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique allows me to assess many different companies in a uniform manner using new information. For Enprise Group, its latest earnings (trailing twelve month) is NZ$736.00K, which, against the prior year’s level, has taken a dive by a large -44.58%. Since these figures may be somewhat short-term thinking, I’ve calculated an annualized five-year figure for Enprise Group’s net income, which stands at NZ$373.88K This shows that though earnings declined from the previous year, over time, Enprise Group’s profits have been increasing on average.
What’s enabled this growth? Let’s see if it is only because of industry tailwinds, or if Enprise Group has seen some company-specific growth. In the last few years, Enprise Group grew its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Inspecting growth from a sector-level, the NZ software industry has been ramping up growth, more than doubling average earnings in the previous twelve months, and a strong 31.07% over the past five years. This suggests that whatever tailwind the industry is benefiting from, Enprise Group has not been able to gain as much as its average peer.
What does this mean?
Enprise Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. You should continue to research Enprise Group to get a more holistic view of the stock by looking at:
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1. Financial Health: Is ENS’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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2. Valuation: What is ENS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ENS is currently mispriced by the market.
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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 30 September 2017. 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.