Does The Environmental Group Limited's (ASX:EGL) Recent Track Record Look Strong?

Examining The Environmental Group Limited's (ASX:EGL) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess EGL's latest performance announced on 31 December 2019 and compare these figures to its longer term trend and industry movements.

See our latest analysis for Environmental Group

Did EGL's recent earnings growth beat the long-term trend and the industry?

EGL's trailing twelve-month earnings (from 31 December 2019) of AU$806k has jumped 44% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.1%, indicating the rate at which EGL is growing has accelerated. What's enabled this growth? Well, let’s take a look at if it is merely a result of an industry uplift, or if Environmental Group has experienced some company-specific growth.

In terms of returns from investment, Environmental Group has fallen short of achieving a 20% return on equity (ROE), recording 5.0% instead. Furthermore, its return on assets (ROA) of 4.2% is below the AU Machinery industry of 5.8%, indicating Environmental Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Environmental Group’s debt level, has declined over the past 3 years from 6.7% to 6.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 17% to 24% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Recent positive growth isn't always indicative of a continued optimistic outlook. There could be factors that are impacting the industry as a whole, hence the high industry growth rate over the same period of time. I recommend you continue to research Environmental Group to get a better picture of the stock by looking at:

1. Financial Health: Are EGL’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.

2. Valuation: What is EGL 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 EGL is currently mispriced by the market.

3. 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.

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. Thank you for reading.