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After reading Capgemini SE’s (EPA:CAP) most recent earnings announcement (31 December 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 pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Capgemini’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Was CAP weak performance lately part of a long-term decline?
CAP’s trailing twelve-month earnings (from 31 December 2018) of €730m has declined by -11% 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 8.3%, indicating the rate at which CAP is growing has slowed down. Why could this be happening? Let’s examine what’s transpiring with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Capgemini has fallen short of achieving a 20% return on equity (ROE), recording 9.7% instead. However, its return on assets (ROA) of 4.5% exceeds the FR IT industry of 4.4%, indicating Capgemini has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Capgemini’s debt level, has increased over the past 3 years from 9.7% to 11%.
What does this mean?
Capgemini’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 affecting its business. I recommend you continue to research Capgemini to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CAP’s future growth? Take a look at our free research report of analyst consensus for CAP’s outlook.
- Financial Health: Are CAP’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 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 email@example.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.