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When Lena Lighting S.A. (WSE:LEN) 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 Lena Lighting 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 LEN has performed.
Despite a decline, did LEN underperform the long-term trend and the industry?
LEN’s trailing twelve-month earnings (from 31 March 2019) of zł7.6m has declined by -12% 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 -2.8%, indicating the rate at which LEN is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, Lena Lighting has fallen short of achieving a 20% return on equity (ROE), recording 7.8% instead. However, its return on assets (ROA) of 6.9% exceeds the PL Electrical industry of 5.1%, indicating Lena Lighting has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Lena Lighting’s debt level, has declined over the past 3 years from 11% to 9.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.06% to 0.2% over the past 5 years.
What does this mean?
Lena Lighting’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that experience a prolonged period of decline in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and growth. I recommend you continue to research Lena Lighting to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LEN’s future growth? Take a look at our free research report of analyst consensus for LEN’s outlook.
- Financial Health: Are LEN’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 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 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.