When Heineken Holding N.V. (ENXTAM:HEIO) released its most recent earnings update (30 June 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Heineken Holding has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see HEIO has performed.
Was HEIO’s recent earnings decline worse than the long-term trend and the industry?
HEIO’s trailing twelve-month earnings (from 30 June 2019) of €953m has declined by -6.2% 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 4.9%, indicating the rate at which HEIO is growing has slowed down. Why is this? Well, let’s look at what’s going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Heineken Holding has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 3.0% is below the NL Beverage industry of 5.3%, indicating Heineken Holding’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Heineken Holding’s debt level, has declined over the past 3 years from 10% to 10%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 94% to 102% over the past 5 years.
What does this mean?
Though Heineken Holding’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research Heineken Holding to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HEIO’s future growth? Take a look at our free research report of analyst consensus for HEIO’s outlook.
- Financial Health: Are HEIO’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 2019. This may not be consistent with full year annual report figures.
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