Examining how LEM Holding SA (SWX:LEHN) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how LEM Holding is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its electronic industry peers.
Despite a decline, did LEHN underperform the long-term trend and the industry?
LEHN’s trailing twelve-month earnings (from 30 September 2019) of CHF50m has declined by -9.3% 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 5.6%, indicating the rate at which LEHN is growing has slowed down. Why is this? Well, let’s look at what’s occurring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, LEM Holding has invested its equity funds well leading to a 62% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 26% exceeds the CH Electronic industry of 5.6%, indicating LEM Holding has used its assets more efficiently. However, its return on capital (ROC), which also accounts for LEM Holding’s debt level, has declined over the past 3 years from 72% to 60%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 16% to 50% over the past 5 years.
What does this mean?
Though LEM Holding’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. I suggest you continue to research LEM Holding to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LEHN’s future growth? Take a look at our free research report of analyst consensus for LEHN’s outlook.
- Financial Health: Are LEHN’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 September 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 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.
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