Lena Lighting S.A.’s (WSE:LEN) Earnings Dropped -12%, Did Its Industry Show Weakness Too?

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Assessing Lena Lighting S.A.’s (WSE:LEN) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Lena Lighting is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its electrical industry peers.

View our latest analysis for Lena Lighting

Did LEN perform worse than its track record and 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? Let’s examine what’s occurring with margins and whether the entire industry is experiencing the hit as well.

WSE:LEN Income Statement, June 24th 2019
WSE:LEN Income Statement, June 24th 2019

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?

Though Lena Lighting’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that experience an extended period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I recommend you continue to research Lena Lighting to get a better picture of the stock by looking at:

  1. 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.
  2. 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.
  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.

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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.