Yahoo News Has SDI Limited's (ASX:SDI) Earnings Momentum Changed Recently?
When SDI Limited (ASX:SDI) released its most recent earnings update (31 December 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were SDI's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not SDI actually performed well. Below is a quick commentary on how I see SDI has performed.
View our latest analysis for SDI
Did SDI's recent performance beat its trend and industry?
SDI's trailing twelve-month earnings (from 31 December 2019) of AU$7.7m has increased by 0.8% 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 2.1%, indicating the rate at which SDI is growing has slowed down. To understand what's happening, let’s take a look at what’s occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, SDI has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. Furthermore, its return on assets (ROA) of 8.6% is below the AU Medical Equipment industry of 9.0%, indicating SDI's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for SDI’s debt level, has declined over the past 3 years from 15% to 14%.
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 SDI to get a more holistic view of the stock by looking at:
Financial Health: Are SDI’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.
Valuation: What is SDI 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 SDI is currently mispriced by the market.
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 December 2019. This may not be consistent with full year annual report figures.
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.
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