Bayer Aktiengesellschaft's (FRA:BAYN) Earnings Dropped -13.20%, How Did It Fare Against The Industry?

For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Bayer Aktiengesellschaft (DB:BAYN) useful as an attempt to give more color around how Bayer is currently performing. See our latest analysis for Bayer

Despite a decline, did BAYN underperform the long-term trend and the industry?

I prefer to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to assess different stocks on a more comparable basis, using the latest information. For Bayer, its latest trailing-twelve-month earnings is €3.25B, which, in comparison to last year’s level, has fallen by -13.20%. Since these figures are relatively short-term, I’ve estimated an annualized five-year figure for Bayer's net income, which stands at €3.24B This shows that despite the fact that earnings growth was negative from the prior year, over a longer period of time, Bayer's profits have been rising on average.

How has it been able to do this? Let's take a look at whether it is only attributable to an industry uplift, or if Bayer has experienced some company-specific growth. Over the past couple of years, Bayer increased its bottom line faster than revenue by successfully controlling its costs. This brought about a margin expansion and profitability over time. Viewing growth from a sector-level, the DE pharmaceuticals industry has been growing its average earnings by double-digit 11.73% over the past year, and a more muted 8.44% over the previous five years. This suggests that any tailwind the industry is enjoying, Bayer has not been able to reap as much as its industry peers.

What does this mean?

Though Bayer's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. You should continue to research Bayer to get a more holistic view of the stock by looking at:

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

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.