After looking at Metall Zug AG’s (VTX:METN) latest earnings update (31 December 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Despite a decline, did METN underperform the long-term trend and the industry?
METN’s trailing twelve-month earnings (from 31 December 2018) of CHF64m has declined by -6.1% 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 -8.1%, indicating the rate at which METN is growing has slowed down. What could be happening here? Let’s examine what’s going on with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, Metall Zug has fallen short of achieving a 20% return on equity (ROE), recording 9.0% instead. Furthermore, its return on assets (ROA) of 5.8% is below the CH Consumer Durables industry of 5.9%, indicating Metall Zug’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Metall Zug’s debt level, has increased over the past 3 years from 9.2% to 10%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 1.1% to 0.7% over the past 5 years.
What does this mean?
Metall Zug’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that endure a drawn out period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the recent industry disruption and expansion. I suggest you continue to research Metall Zug to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for METN’s future growth? Take a look at our free research report of analyst consensus for METN’s outlook.
- Financial Health: Are METN’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.
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