When AB Fagerhult (STO:FAG) announced its most recent earnings (31 December 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how AB Fagerhult performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see FAG has performed.
How Did FAG’s Recent Performance Stack Up Against Its Past?
FAG’s trailing twelve-month earnings (from 31 December 2018) of kr503m has increased by 1.8% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 19%, indicating the rate at which FAG is growing has slowed down. Why could this be happening? Well, let’s examine what’s occurring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, AB Fagerhult has invested its equity funds well leading to a 24% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.2% exceeds the SE Electrical industry of 7.1%, indicating AB Fagerhult has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for AB Fagerhult’s debt level, has increased over the past 3 years from 13% to 13%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research AB Fagerhult to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FAG’s future growth? Take a look at our free research report of analyst consensus for FAG’s outlook.
- Financial Health: Are FAG’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 December 2018. This may not be consistent with full year annual report figures.
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