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After reading Service Stream Limited's (ASX:SSM) most recent earnings announcement (30 June 2019), 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 pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Service Stream's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Check out our latest analysis for Service Stream
How SSM fared against its long-term earnings performance and its industry
SSM's trailing twelve-month earnings (from 30 June 2019) of AU$50m has jumped 21% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 38%, indicating the rate at which SSM is growing has slowed down. What could be happening here? Well, let's look at what's occurring with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Service Stream has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 8.2% exceeds the AU Construction industry of 6.6%, indicating Service Stream has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Service Stream’s debt level, has increased over the past 3 years from 14% to 19%.
What does this mean?
Though Service Stream's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Service Stream to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for SSM’s future growth? Take a look at our free research report of analyst consensus for SSM’s outlook.
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Financial Health: Are SSM’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 30 June 2019. 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 editorial-team@simplywallst.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. Thank you for reading.