With A -18% Earnings Drop, Did Danone S.A. (EPA:BN) Really Underperform?
Analyzing Danone S.A.'s (ENXTPA:BN) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess BN's recent performance announced on 31 December 2019 and compare these figures to its long-term trend and industry movements.
Check out our latest analysis for Danone
How Did BN's Recent Performance Stack Up Against Its Past?
BN's trailing twelve-month earnings (from 31 December 2019) of €1.9b has declined by -18% 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 15%, indicating the rate at which BN is growing has slowed down. Why could this be happening? Let's examine what's occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Danone has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 4.7% exceeds the FR Food industry of 3.3%, indicating Danone has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Danone’s debt level, has increased over the past 3 years from 8.8% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 95% to 94% over the past 5 years.
What does this mean?
Though Danone'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 impacting its business. I suggest you continue to research Danone to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BN’s future growth? Take a look at our free research report of analyst consensus for BN’s outlook.
Financial Health: Are BN’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 2019. This may not be consistent with full year annual report figures.
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.
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