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In this article, I will take a look at Solvay SA’s (EBR:SOLB) most recent earnings update (31 December 2018) and compare these latest figures against its performance over the past few years, along with how the rest of SOLB’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.
Check out our latest analysis for Solvay
Commentary On SOLB’s Past Performance
SOLB’s trailing twelve-month earnings (from 31 December 2018) of €657m has declined by -20% 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 27%, indicating the rate at which SOLB is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Solvay has fallen short of achieving a 20% return on equity (ROE), recording 6.6% instead. Furthermore, its return on assets (ROA) of 3.5% is below the BE Chemicals industry of 5.4%, indicating Solvay’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Solvay’s debt level, has increased over the past 3 years from 4.3% to 6.7%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 48% to 36% over the past 5 years.
What does this mean?
Though Solvay’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I recommend you continue to research Solvay to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SOLB’s future growth? Take a look at our free research report of analyst consensus for SOLB’s outlook.
- Financial Health: Are SOLB’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 December 2018. 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 editorial-team@simplywallst.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.