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BKW AG (VTX:BKW): Does The Earnings Decline Make It An Underperformer?

Simply Wall St

When BKW AG's (SWX:BKW) announced its latest earnings (30 June 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were BKW's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not BKW actually performed well. Below is a quick commentary on how I see BKW has performed.

View our latest analysis for BKW

Was BKW's recent earnings decline worse than the long-term trend and the industry?

BKW's trailing twelve-month earnings (from 30 June 2019) of CHF259m has declined by -2.2% 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 9.6%, indicating the rate at which BKW is growing has slowed down. What could be happening here? Let's examine what's going on with margins and whether the whole industry is experiencing the hit as well.

SWX:BKW Income Statement, October 13th 2019

In terms of returns from investment, BKW has fallen short of achieving a 20% return on equity (ROE), recording 7.8% instead. Furthermore, its return on assets (ROA) of 4.0% is below the CH Electric Utilities industry of 4.5%, indicating BKW's are utilized less efficiently. However, its return on capital (ROC), which also accounts for BKW’s debt level, has increased over the past 3 years from 4.4% to 4.9%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 63% to 43% over the past 5 years.

What does this mean?

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

  1. Future Outlook: What are well-informed industry analysts predicting for BKW’s future growth? Take a look at our free research report of analyst consensus for BKW’s outlook.
  2. Financial Health: Are BKW’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 30 June 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.