After reading FRoSTA Aktiengesellschaft’s (FRA:NLM) most recent earnings announcement (31 December 2018), I found it useful to look back at how the company has performed in the past 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 a crucial aspect. Below is a brief commentary on my key takeaways.
Did NLM perform worse than its track record and industry?
NLM’s trailing twelve-month earnings (from 31 December 2018) of €20m has declined by -14% 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 11%, indicating the rate at which NLM is growing has slowed down. Why is this? Well, let’s look at what’s occurring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, FRoSTA has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 6.3% exceeds the DE Food industry of 5.2%, indicating FRoSTA has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for FRoSTA’s debt level, has increased over the past 3 years from 15% to 15%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 33% to 25% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research FRoSTA to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NLM’s future growth? Take a look at our free research report of analyst consensus for NLM’s outlook.
- Financial Health: Are NLM’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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