SimCorp A/S's (CPH:SIM) Earnings Grew 26%, Did It Beat Long-Term Trend?
Investors with a long-term horizong may find it valuable to assess SimCorp A/S's (CPSE:SIM) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how SimCorp is currently performing.
Check out our latest analysis for SimCorp
Were SIM's earnings stronger than its past performances and the industry?
SIM's trailing twelve-month earnings (from 31 December 2019) of €97m has jumped 26% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 18%, indicating the rate at which SIM is growing has accelerated. What's enabled this growth? Let's see if it is only because of an industry uplift, or if SimCorp has experienced some company-specific growth.
In terms of returns from investment, SimCorp has invested its equity funds well leading to a 42% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 22% exceeds the DK Software industry of 5.6%, indicating SimCorp has used its assets more efficiently. However, its return on capital (ROC), which also accounts for SimCorp’s debt level, has declined over the past 3 years from 86% to 42%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 2.0% to 8.7% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While SimCorp has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research SimCorp to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SIM’s future growth? Take a look at our free research report of analyst consensus for SIM’s outlook.
Financial Health: Are SIM’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 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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