Evonik Industries AG's (ETR:EVK) Earnings Dropped -11%, How Did It Fare Against The Industry?

Analyzing Evonik Industries AG's (XTRA:EVK) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess EVK's recent performance announced on 30 September 2019 and compare these figures to its long-term trend and industry movements.

See our latest analysis for Evonik Industries

How Did EVK's Recent Performance Stack Up Against Its Past?

EVK's trailing twelve-month earnings (from 30 September 2019) of €750m has declined by -11% 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 2.3%, indicating the rate at which EVK is growing has slowed down. Why could this be happening? Let's examine what's occurring with margins and if the entire industry is experiencing the hit as well.

In terms of returns from investment, Evonik Industries has fallen short of achieving a 20% return on equity (ROE), recording 9.1% instead. However, its return on assets (ROA) of 3.9% exceeds the DE Chemicals industry of 3.9%, indicating Evonik Industries has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Evonik Industries’s debt level, has declined over the past 3 years from 9.2% to 7.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 27% to 45% over the past 5 years.

What does this mean?

Evonik Industries's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. In some cases, companies that face a prolonged period of reduction in earnings are going through some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes Evonik Industries and its peers a riskier investment. You should continue to research Evonik Industries to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for EVK’s future growth? Take a look at our free research report of analyst consensus for EVK’s outlook.
2. Financial Health: Are EVK’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 30 September 2019. This may not be consistent with full year annual report figures.

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.

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