Understanding Pfleiderer Group Spólka Akcyjna’s (WSE:PFL) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Pfleiderer Group Spólka Akcyjna is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period.
Was PFL weak performance lately part of a long-term decline?PFL’s trailing twelve-month earnings (from 31 March 2018) of €14.11m has declined by -32.25% 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 13.94%, indicating the rate at which PFL is growing has slowed down. What could be happening here? Well, let’s look at what’s going on with margins and if the entire industry is feeling the heat.
Revenue growth over the past couple of years, has been positive, however, earnings growth has fallen behind meaning Pfleiderer Group Spólka Akcyjna has been growing its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the PL forestry industry has been enduring some headwinds over the past twelve months, leading to an average earnings drop of -10.92%. This is a major change, given that the industry has been delivering a positive rate of 9.87%, on average, over the past five years. This growth is a median of profitable companies of 7 Forestry companies in PL including Stelmet, Arctic Paper and Standrew. This means that whatever recent headwind the industry is experiencing, it’s hitting Pfleiderer Group Spólka Akcyjna harder than its peers.In terms of returns from investment, Pfleiderer Group Spólka Akcyjna has not invested its equity funds well, leading to a 6.19% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.85% is below the PL Forestry industry of 4.09%, indicating Pfleiderer Group Spólka Akcyjna’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Pfleiderer Group Spólka Akcyjna’s debt level, has declined over the past 3 years from 14.16% to 5.00%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 39.70% to 161.43% over the past 5 years.
What does this mean?
Pfleiderer Group Spólka Akcyjna’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that face an extended period of decline in earnings are going through some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes Pfleiderer Group Spólka Akcyjna and its peers a higher risk investment. You should continue to research Pfleiderer Group Spólka Akcyjna to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PFL’s future growth? Take a look at our free research report of analyst consensus for PFL’s outlook.
- Financial Health: Are PFL’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 firstname.lastname@example.org.