Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Sandvik AB's (STO:SAND) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
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Was SAND's recent earnings decline worse than the long-term trend and the industry?
SAND's trailing twelve-month earnings (from 31 March 2019) of kr13b has declined by -3.3% 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 29%, indicating the rate at which SAND is growing has slowed down. Why could this be happening? Let's examine what's transpiring with margins and if the rest of the industry is feeling the heat.
In terms of returns from investment, Sandvik has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the SE Machinery industry of 8.1%, indicating Sandvik has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Sandvik’s debt level, has increased over the past 3 years from 12% to 19%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 96% to 53% over the past 5 years.
What does this mean?
Sandvik's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I suggest you continue to research Sandvik to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SAND’s future growth? Take a look at our free research report of analyst consensus for SAND’s outlook.
- Financial Health: Are SAND’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 March 2019. 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 email@example.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.