In this commentary, I will examine Distribuidora Internacional de Alimentación SA’s (BME:DIA) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the consumer retailing industry performed. As an investor, I find it beneficial to assess DIA’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.
Commentary On DIA’s Past PerformanceDIA’s trailing twelve-month earnings (from 31 December 2017) of €131.01m has declined by -31.02% 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 6.58%, indicating the rate at which DIA is growing has slowed down. Why is this? Well, let’s look at what’s occurring with margins and if the whole industry is facing the same headwind.
In the last couple of years, revenue growth has fallen behind earnings, which indicates that Distribuidora Internacional de Alimentación’s bottom line has been propelled by unsustainable cost-reductions. Viewing growth from a sector-level, the ES consumer retailing industry has been growing its average earnings by double-digit 12.02% in the past twelve months, and a more subdued 5.34% over the past half a decade. Since the sector in is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as , and . This suggests that any uplift the industry is deriving benefit from, Distribuidora Internacional de Alimentación has not been able to reap as much as its average peer.In terms of returns from investment, Distribuidora Internacional de Alimentación has invested its equity funds well leading to a 40.18% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 4.74% is below the ES Consumer Retailing industry of 5.40%, indicating Distribuidora Internacional de Alimentación’s are utilized less efficiently. Furthermore, its return on capital (ROC), which also accounts for Distribuidora Internacional de Alimentación’s debt level, has declined over the past 3 years from 35.81% to 13.84%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience a prolonged period of diminishing earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. You should continue to research Distribuidora Internacional de Alimentación to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DIA’s future growth? Take a look at our free research report of analyst consensus for DIA’s outlook.
- Financial Health: Is DIA’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.
To help readers see pass 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 firstname.lastname@example.org.