Investors with a long-term horizong may find it valuable to assess EssilorLuxottica Société anonyme’s (ENXTPA:EL) 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 EssilorLuxottica Société anonyme is currently performing.
Did EL beat its long-term earnings growth trend and its industry?
EL’s trailing twelve-month earnings (from 30 June 2019) of €1.2b has increased by 4.3% 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 8.9%, indicating the rate at which EL is growing has slowed down. To understand what’s happening, let’s examine what’s going on with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, EssilorLuxottica Société anonyme has fallen short of achieving a 20% return on equity (ROE), recording 4.0% instead. Furthermore, its return on assets (ROA) of 2.7% is below the FR Luxury industry of 6.5%, indicating EssilorLuxottica Société anonyme’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for EssilorLuxottica Société anonyme’s debt level, has declined over the past 3 years from 14% to 4.4%.
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 suggest you continue to research EssilorLuxottica Société anonyme to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EL’s future growth? Take a look at our free research report of analyst consensus for EL’s outlook.
- Financial Health: Are EL’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 2019. This may not be consistent with full year annual report figures.
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.
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