After reading Meliá Hotels International SA’s (BME:MEL) most recent earnings announcement (30 June 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.
Were MEL’s earnings stronger than its past performances and the industry?
MEL’s trailing twelve-month earnings (from 30 June 2018) of €133m has jumped 18% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 48%, indicating the rate at which MEL is growing has slowed down. What could be happening here? Well, let’s take a look at what’s going on with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Meliá Hotels International has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.3% is below the ES Hospitality industry of 5.8%, indicating Meliá Hotels International’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Meliá Hotels International’s debt level, has increased over the past 3 years from 5.5% to 7.4%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 146% to 81% over the past 5 years.
What does this mean?
Though Meliá Hotels International’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Meliá Hotels International gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Meliá Hotels International to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MEL’s future growth? Take a look at our free research report of analyst consensus for MEL’s outlook.
- Financial Health: Are MEL’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 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past 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 email@example.com.