With A -9.0% Earnings Drop, Did Dassault Aviation SA (EPA:AM) Really Underperform?

Measuring Dassault Aviation SA’s (EPA:AM) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess AM’s recent performance announced on 31 December 2018 and weigh these figures against its long-term trend and industry movements.

See our latest analysis for Dassault Aviation

Was AM’s recent earnings decline worse than the long-term trend and the industry?

AM’s trailing twelve-month earnings (from 31 December 2018) of €573m has declined by -9.0% 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 13%, indicating the rate at which AM is growing has slowed down. Why could this be happening? Let’s examine what’s transpiring with margins and if the entire industry is feeling the heat.

ENXTPA:AM Income Statement, April 2nd 2019
ENXTPA:AM Income Statement, April 2nd 2019

In terms of returns from investment, Dassault Aviation has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 3.8% is below the FR Aerospace & Defense industry of 3.8%, indicating Dassault Aviation’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Dassault Aviation’s debt level, has increased over the past 3 years from 7.0% to 10%.

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 recommend you continue to research Dassault Aviation to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AM’s future growth? Take a look at our free research report of analyst consensus for AM’s outlook.
  2. Financial Health: Are AM’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 2018. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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. Thank you for reading.