Should Hugo Boss AG’s (FRA:BOSS) Recent Earnings Decline Worry You?

Examining Hugo Boss AG’s (FRA:BOSS) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess BOSS’s latest performance announced on 30 June 2018 and weigh these figures against its longer term trend and industry movements.

View our latest analysis for Hugo Boss

Commentary On BOSS’s Past Performance

BOSS’s trailing twelve-month earnings (from 30 June 2018) of €228m has declined by -8.7% 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 -9.7%, indicating the rate at which BOSS is growing has slowed down. Why is this? Well, let’s look at what’s going on with margins and if the whole industry is facing the same headwind.

DB:BOSS Income Statement Export October 19th 18
DB:BOSS Income Statement Export October 19th 18

In terms of returns from investment, Hugo Boss has invested its equity funds well leading to a 27% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the DE Luxury industry of 5.8%, indicating Hugo Boss has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Hugo Boss’s debt level, has declined over the past 3 years from 41% to 31%.

What does this mean?

Though Hugo Boss’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that face an extended period of reduction in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry growth and disruption. I suggest you continue to research Hugo Boss to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BOSS’s future growth? Take a look at our free research report of analyst consensus for BOSS’s outlook.
  2. Financial Health: Are BOSS’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 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.