Yahoo Finance Data#3 Limited (ASX:DTL): Does The -8.4% Earnings Drop Reflect A Longer Term Trend?
After looking at Data#3 Limited’s (ASX:DTL) latest earnings update (30 June 2018), I found it helpful to revisit the company’s performance in the past couple of years 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 an important aspect. In this article I briefly touch on my key findings.
See our latest analysis for Data#3
How Well Did DTL Perform?
DTL’s trailing twelve-month earnings (from 30 June 2018) of AU$14m has declined by -8.4% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 12%, indicating the rate at which DTL is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Data#3 has invested its equity funds well leading to a 31% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 3.5% is below the AU IT industry of 4.9%, indicating Data#3’s are utilized less efficiently. Though, its return on capital (ROC), which also accounts for Data#3’s debt level, has increased over the past 3 years from 35% to 40%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 5.5% to 0.5% over the past 5 years.
What does this mean?
Data#3’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 capricious earnings, can have many factors affecting its business. I suggest you continue to research Data#3 to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for DTL’s future growth? Take a look at our free research report of analyst consensus for DTL’s outlook.
Financial Health: Are DTL’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 30 June 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.
