Rocca Spólka Akcyjna (WSE:RCA): Does The Earnings Decline Make It An Underperformer?

In this commentary, I will examine Rocca Spólka Akcyjna’s (WSE:RCA) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the basic materials industry performed. As an investor, I find it beneficial to assess RCA’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. View our latest analysis for Rocca Spólka Akcyjna

Was RCA’s weak performance lately a part of a long-term decline?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method enables me to analyze many different companies on a more comparable basis, using new information. For Rocca Spólka Akcyjna, its latest trailing-twelve-month earnings is ZŁ87.98K, which compared to the previous year’s level, has dropped by a significant -39.66%. Given that these figures may be somewhat myopic, I have estimated an annualized five-year figure for Rocca Spólka Akcyjna’s net income, which stands at -ZŁ129.08K This means that although earnings growth was negative from last year, over the long run, Rocca Spólka Akcyjna’s profits have been rising on average.

WSE:RCA Income Statement Apr 23rd 18
WSE:RCA Income Statement Apr 23rd 18
What’s the driver of this growth? Well, let’s take a look at if it is merely attributable to an industry uplift, or if Rocca Spólka Akcyjna has seen some company-specific growth. In the last few years, Rocca Spólka Akcyjna grew bottom-line, while its top-line declined, by effectively managing its costs. This has caused to a margin expansion and profitability over time. Scanning growth from a sector-level, the PL basic materials industry has been enduring severe headwinds over the past year, leading to an average earnings drop of -39.66%. This is a substantial change, given that the industry has constantly been delivering a a notable growth of 19.35% in the past five years. This suggests that any recent headwind the industry is experiencing, it’s hitting Rocca Spólka Akcyjna harder than its peers.

What does this mean?

Rocca Spólka Akcyjna’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. I suggest you continue to research Rocca Spólka Akcyjna to get a more holistic view of the stock by looking at:

  1. Financial Health: Is RCA’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.
  2. 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 September 2017. This may not be consistent with full year annual report figures.