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When Tieto Oyj (HEL:TIETO) released its most recent earnings update (31 March 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Tieto Oyj’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not TIETO actually performed well. Below is a quick commentary on how I see TIETO has performed.
Did TIETO perform better than its track record and industry?
TIETO’s trailing twelve-month earnings (from 31 March 2019) of €120m has declined by -1.1% 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 21%, indicating the rate at which TIETO is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Tieto Oyj has invested its equity funds well leading to a 30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.8% exceeds the FI IT industry of 6.0%, indicating Tieto Oyj has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Tieto Oyj’s debt level, has declined over the past 3 years from 29% to 19%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 26% to 115% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. You should continue to research Tieto Oyj to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TIETO’s future growth? Take a look at our free research report of analyst consensus for TIETO’s outlook.
- Financial Health: Are TIETO’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 March 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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.