Today I will take a look at ENEA SA’s (WSE:ENA) most recent earnings update (30 September 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the electric utilities industry performed. As an investor, I find it beneficial to assess ENA’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.
Was ENA weak performance lately part of a long-term decline?
ENA’s trailing twelve-month earnings (from 30 September 2018) of zł869m has declined by -2.8% 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 2.6%, indicating the rate at which ENA is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, ENEA has fallen short of achieving a 20% return on equity (ROE), recording 6.3% instead. However, its return on assets (ROA) of 3.7% exceeds the PL Electric Utilities industry of 3.5%, indicating ENEA has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for ENEA’s debt level, has declined over the past 3 years from 9.1% to 5.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 7.4% to 53% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research ENEA to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ENA’s future growth? Take a look at our free research report of analyst consensus for ENA’s outlook.
- Financial Health: Are ENA’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 30 September 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.