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When Cairo Communication S.p.A. (BIT:CAI) released its most recent earnings update (31 March 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Cairo Communication performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see CAI has performed.
How CAI fared against its long-term earnings performance and its industry
CAI's trailing twelve-month earnings (from 31 March 2019) of €60m has increased by 3.8% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 21%, indicating the rate at which CAI is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Cairo Communication has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 4.3% exceeds the IT Media industry of 2.7%, indicating Cairo Communication has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Cairo Communication’s debt level, has increased over the past 3 years from 5.5% to 9.4%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 36% to 30% over the past 5 years.
What does this mean?
Though Cairo Communication's past data is helpful, it is only one aspect of my investment thesis. While Cairo Communication has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Cairo Communication to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CAI’s future growth? Take a look at our free research report of analyst consensus for CAI’s outlook.
- Financial Health: Are CAI’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.
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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.