How Does Bâloise Holding AG’s (VTX:BALN) Earnings Growth Stack Up Against Industry Performance?

After looking at Bâloise Holding AG’s (VTX:BALN) latest earnings update (31 December 2017), 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.

Check out our latest analysis for Bâloise Holding

Could BALN beat the long-term trend and outperform its industry?

BALN’s trailing twelve-month earnings (from 31 December 2017) of CHF548.00m has increased by 2.47% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 13.80%, indicating the rate at which BALN 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 feeling the heat.

Over the past couple of years, revenue growth has fallen behind which implies that Bâloise Holding’s bottom line has been driven by unmaintainable cost-reductions. Inspecting growth from a sector-level, the CH insurance industry has been enduring some headwinds in the past year, leading to an average earnings drop of -4.89%. This is a momentous change, given that the industry has been delivering a positive rate of 3.87%, on average, over the last five years. This growth is a median of profitable companies of 17 Insurance companies in CH including Swiss Re, Swiss Re and Münchener Rückversicherungs-Gesellschaft. This means that any recent headwind the industry is enduring, Bâloise Holding is relatively better-cushioned than its peers.

SWX:BALN Income Statement Export August 9th 18
SWX:BALN Income Statement Export August 9th 18
In terms of returns from investment, Bâloise Holding has not invested its equity funds well, leading to a 8.30% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 0.74% exceeds the CH Insurance industry of 0.74%, indicating Bâloise Holding has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Bâloise Holding’s debt level, has declined over the past 3 years from 1.34% to 0.94%.

What does this mean?

Though Bâloise Holding’s past data is helpful, it is only one aspect of my investment thesis. While Bâloise Holding has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Bâloise Holding to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BALN’s future growth? Take a look at our free research report of analyst consensus for BALN’s outlook.
  2. Financial Health: Are BALN’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 31 December 2017. 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.