Yahoo Finance Does Softcat plc’s (LON:SCT) Recent Track Record Look Strong?
After reading Softcat plc’s (LON:SCT) most recent earnings announcement (31 July 2018), 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.
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Could SCT beat the long-term trend and outperform its industry?
SCT’s trailing twelve-month earnings (from 31 July 2018) of UK£55m has jumped 37% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 16%, indicating the rate at which SCT is growing has accelerated. What’s enabled this growth? Well, let’s take a look at whether it is merely because of an industry uplift, or if Softcat has seen some company-specific growth.
In terms of returns from investment, Softcat has invested its equity funds well leading to a 55% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 19% exceeds the GB IT industry of 7.2%, indicating Softcat has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Softcat’s debt level, has increased over the past 3 years from 41% to 67%.
What does this mean?
Softcat’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? You should continue to research Softcat to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SCT’s future growth? Take a look at our free research report of analyst consensus for SCT’s outlook.
Financial Health: Are 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.
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 31 July 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.
