When Elemental Holding SA (WSE:EMT) released its most recent earnings update (31 March 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Elemental Holding's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not EMT actually performed well. Below is a quick commentary on how I see EMT has performed.
Check out our latest analysis for Elemental Holding
How Well Did EMT Perform?
EMT's trailing twelve-month earnings (from 31 March 2018) of zł18.5m has more than halved from zł50.8m in the prior year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 15.8%, indicating the rate at which EMT is growing has slowed down. Why is this? Well, let’s take a look at what’s occurring with margins and if the whole industry is experiencing the hit as well.
In the past couple of years, revenue growth has failed to keep up which suggests that Elemental Holding’s bottom line has been driven by unsustainable cost-reductions.
Inspecting growth from a sector-level, the PL commercial services industry has been growing its average earnings by double-digit 29.8% over the previous year, and a less exciting 7.6% over the past five years. This growth is a median of profitable companies of 15 Commercial Services companies in PL including Centrum Finansowe, Gwarant Agencja Ochrony and Impel. This shows that whatever tailwind the industry is deriving benefit from, Elemental Holding has not been able to reap as much as its average peer.
In terms of returns from investment, Elemental Holding has fallen short of achieving a 20% return on equity (ROE), recording 5.2% instead. Furthermore, its return on assets (ROA) of 3.4% is below the PL Commercial Services industry of 6.2%, indicating Elemental Holding's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Elemental Holding’s debt level, has declined over the past 3 years from 8.6% to 5.5%.
What does this mean?
Though Elemental Holding's past data is helpful, it is only one aspect of my investment thesis. Usually companies that experience an extended period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry expansion and disruption. I recommend you continue to research Elemental Holding to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EMT’s future growth? Take a look at our free research report of analyst consensus for EMT’s outlook.
- Financial Health: Are EMT’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 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.