With A -7.1% Earnings Drop, Is SJR in Scandinavia AB (publ)'s (STO:SJR B) A Concern?

After reading SJR in Scandinavia AB (publ)'s (STO:SJR B) most recent earnings announcement (31 December 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.

Check out our latest analysis for SJR in Scandinavia

Was SJR B weak performance lately part of a long-term decline?

SJR B's trailing twelve-month earnings (from 31 December 2018) of kr29m has declined by -7.1% 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 9.8%, indicating the rate at which SJR B is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and if the entire industry is experiencing the hit as well.

In terms of returns from investment, SJR in Scandinavia has invested its equity funds well leading to a 49% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 24% exceeds the SE Professional Services industry of 7.2%, indicating SJR in Scandinavia has used its assets more efficiently. However, its return on capital (ROC), which also accounts for SJR in Scandinavia’s debt level, has declined over the past 3 years from 64% to 63%.

What does this mean?

Though SJR in Scandinavia's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. I recommend you continue to research SJR in Scandinavia to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for SJR B’s future growth? Take a look at our free research report of analyst consensus for SJR B’s outlook.
2. Financial Health: Are SJR B’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 2018. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.