Measuring Capgemini SE’s (ENXTPA:CAP) 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 CAP’s recent performance announced on 31 December 2017 and compare these figures to its historical trend and industry movements. See our latest analysis for Capgemini
Despite a decline, did CAP underperform the long-term trend and the industry?
I look at data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This enables me to assess different stocks in a uniform manner using new information. For Capgemini, its most recent bottom-line (trailing twelve month) is €820.00M, which compared to the prior year’s level, has dropped by -10.97%. Since these values are somewhat short-term thinking, I have estimated an annualized five-year figure for CAP’s net income, which stands at €634.07M This suggests that while earnings growth was negative against the prior year, over the long run, Capgemini’s profits have been rising on average.
What’s enabled this growth? Let’s see if it is merely a result of industry tailwinds, or if Capgemini has experienced some company-specific growth. In the past couple of years, Capgemini increased its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Viewing growth from a sector-level, the FR it industry has been growing its average earnings by double-digit 12.33% over the past year, and 16.97% over the previous five years. This suggests that any uplift the industry is benefiting from, Capgemini has not been able to realize the gains unlike its average peer.
What does this mean?
Capgemini’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. You should continue to research Capgemini to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for CAP’s future growth? Take a look at our free research report of analyst consensus for CAP’s outlook.
- 2. Financial Health: Is CAP’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 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.