EDP - Energias de Portugal SA.'s (ELI:EDP) Earnings Grew 15.89%, Did It Beat Long-Term Trend?

Today I will take a look at EDP - Energias de Portugal SA.'s (ENXTLS:EDP) most recent earnings update (31 December 2017) 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 EDP’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. See our latest analysis for EDP - Energias de Portugal

Could EDP beat the long-term trend and outperform its industry?

For the purpose of this commentary, I like to 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 allows me to assess different stocks on a more comparable basis, using the latest information. For EDP - Energias de Portugal, its latest earnings (trailing twelve month) is €1.11B, which, against last year’s level, has increased by 15.89%. Since these values may be fairly myopic, I’ve computed an annualized five-year figure for EDP's net income, which stands at €1.02B This shows that, generally, EDP - Energias de Portugal has been able to steadily improve its bottom line over the past few years as well.

What's the driver of this growth? Well, let’s take a look at whether it is only due to an industry uplift, or if EDP - Energias de Portugal has seen some company-specific growth. Although both top-line and bottom-line growth rates in the past couple of years, were, on average, negative, earnings were more so. While this brought about a margin contraction, it has moderated EDP - Energias de Portugal's earnings contraction. Eyeballing growth from a sector-level, the PT electric utilities industry has been growing, albeit, at a muted single-digit rate of 9.50% over the prior twelve months, and 4.09% over the past half a decade. This means whatever tailwind the industry is benefiting from, EDP - Energias de Portugal is able to amplify this to its advantage.

What does this mean?

Though EDP - Energias de Portugal's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research EDP - Energias de Portugal to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for EDP’s future growth? Take a look at our free research report of analyst consensus for EDP’s outlook.
2. Financial Health: Is EDP’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 December 2017. This may not be consistent with full year annual report figures.

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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.