Does Capgemini SE’s (EPA:CAP) Past Performance Indicate A Weaker Future?

Measuring Capgemini SE’s (EPA:CAP) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CAP’s recent performance announced on 31 December 2018 and compare these figures to its historical trend and industry movements.

Check out our latest analysis for Capgemini

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. What could be happening here? Well, let’s look at what’s transpiring with margins and whether the rest of the industry is facing the same headwind.

ENXTPA:CAP Income Statement, March 13th 2019
ENXTPA:CAP Income Statement, March 13th 2019

In terms of returns from investment, Capgemini has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 5.0% exceeds the FR IT industry of 5.0%, indicating Capgemini has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Capgemini’s debt level, has declined over the past 3 years from 13% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 23% to 60% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research Capgemini to get a more holistic view of the stock by looking at:

  1. 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.
  2. 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.
  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.