In this commentary, I will examine Dürr Aktiengesellschaft’s (FRA:DUE) latest earnings update (31 December 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the machinery industry performed. As an investor, I find it beneficial to assess DUE’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Was DUE’s recent earnings decline indicative of a tough track record?
DUE’s trailing twelve-month earnings (from 31 December 2018) of €157m has declined by -18% 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 4.5%, indicating the rate at which DUE is growing has slowed down. What could be happening here? Let’s examine what’s occurring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Dürr has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. Furthermore, its return on assets (ROA) of 4.7% is below the DE Machinery industry of 5.5%, indicating Dürr’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Dürr’s debt level, has declined over the past 3 years from 20% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 53% to 61% over the past 5 years.
What does this mean?
Dürr’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research Dürr to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DUE’s future growth? Take a look at our free research report of analyst consensus for DUE’s outlook.
- Financial Health: Are DUE’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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