Today I will examine Zenitel NV’s (ENXTBR:ZENT) latest earnings update (31 December 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of ZENT’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
How Did ZENT’s Recent Performance Stack Up Against Its Past?
ZENT’s trailing twelve-month earnings (from 31 December 2019) of €3.0m has jumped 14% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.7%, indicating the rate at which ZENT is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is solely owing to industry tailwinds, or if Zenitel has experienced some company-specific growth.
In terms of returns from investment, Zenitel has fallen short of achieving a 20% return on equity (ROE), recording 9.3% instead. Furthermore, its return on assets (ROA) of 5.3% is below the BE Communications industry of 7.2%, indicating Zenitel’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Zenitel’s debt level, has increased over the past 3 years from 9.1% to 11%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 9.6% to 6.8% over the past 5 years.
What does this mean?
Zenitel’s track record can be a valuable insight into its earnings performance, but it certainly 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 recommend you continue to research Zenitel to get a better picture of the stock by looking at:
- Financial Health: Are ZENT’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.
- Valuation: What is ZENT worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ZENT is currently mispriced by the market.
- 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 December 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 firstname.lastname@example.org. 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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