Understanding Lycopodium Limited's (ASX:LYL) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Lycopodium is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period.

View our latest analysis for Lycopodium

Was LYL's recent earnings decline worse than the long-term trend and the industry?

LYL's trailing twelve-month earnings (from 30 June 2019) of AU$17m has declined by -11% 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 54%, indicating the rate at which LYL is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the entire industry is feeling the heat.

In terms of returns from investment, Lycopodium has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 12% exceeds the AU Construction industry of 5.8%, indicating Lycopodium has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Lycopodium’s debt level, has increased over the past 3 years from 7.0% to 9.7%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. I recommend you continue to research Lycopodium to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for LYL’s future growth? Take a look at our free research report of analyst consensus for LYL’s outlook.

2. Financial Health: Are LYL’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.

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 30 June 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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