Derichebourg (EPA:DBG): Does The Earnings Decline Make It An Underperformer?

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When Derichebourg (EPA:DBG) released its most recent earnings update (31 March 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Derichebourg performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see DBG has performed.

See our latest analysis for Derichebourg

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

DBG’s trailing twelve-month earnings (from 31 March 2019) of €64m has declined by -19% 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 43%, indicating the rate at which DBG is growing has slowed down. Why could this be happening? Let’s examine what’s occurring with margins and whether the rest of the industry is experiencing the hit as well.

ENXTPA:DBG Income Statement, June 17th 2019
ENXTPA:DBG Income Statement, June 17th 2019

In terms of returns from investment, Derichebourg has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 5.5% exceeds the FR Commercial Services industry of 3.6%, indicating Derichebourg has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Derichebourg’s debt level, has increased over the past 3 years from 6.6% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 134% to 48% over the past 5 years.

What does this mean?

Derichebourg’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I suggest you continue to research Derichebourg to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for DBG’s future growth? Take a look at our free research report of analyst consensus for DBG’s outlook.
  2. Financial Health: Are DBG’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 March 2019. 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.