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With A -8.0% Earnings Drop, Is Continental Aktiengesellschaft's (FRA:CON) A Concern?

Simply Wall St

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Measuring Continental Aktiengesellschaft's (FRA:CON) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess CON's recent performance announced on 31 March 2019 and compare these figures to its historical trend and industry movements.

Check out our latest analysis for Continental

Did CON perform worse than its track record and industry?

CON's trailing twelve-month earnings (from 31 March 2019) of €2.7b has declined by -8.0% 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 6.1%, indicating the rate at which CON is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and whether the whole industry is feeling the heat.

DB:CON Income Statement, June 4th 2019

In terms of returns from investment, Continental has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 6.4% exceeds the DE Auto Components industry of 4.5%, indicating Continental has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Continental’s debt level, has declined over the past 3 years from 21% to 8.2%.

What does this mean?

Continental'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 unpredictable earnings, can have many factors influencing its business. I suggest you continue to research Continental to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for CON’s future growth? Take a look at our free research report of analyst consensus for CON’s outlook.
  2. Financial Health: Are CON’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 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 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.