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Has Compagnie Générale des Établissements Michelin's (EPA:ML) Earnings Momentum Changed Recently?

Simply Wall St

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Understanding how Compagnie Générale des Établissements Michelin (EPA:ML) is performing as a company requires looking at more than just a years' earnings. Today I will run you through a basic sense check to gain perspective on how Compagnie Générale des Établissements Michelin is doing by comparing its latest earnings with its long-term trend as well as the performance of its auto components industry peers.

See our latest analysis for Compagnie Générale des Établissements Michelin

Did ML's recent earnings growth beat the long-term trend and the industry?

ML's trailing twelve-month earnings (from 31 December 2018) of €1.7b has declined by -1.4% 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 12%, indicating the rate at which ML is growing has slowed down. Why is this? Well, let’s take a look at what’s transpiring with margins and if the whole industry is feeling the heat.

ENXTPA:ML Income Statement, July 10th 2019

In terms of returns from investment, Compagnie Générale des Établissements Michelin has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. However, its return on assets (ROA) of 6.3% exceeds the FR Auto Components industry of 6.1%, indicating Compagnie Générale des Établissements Michelin has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Compagnie Générale des Établissements Michelin’s debt level, has declined over the past 3 years from 13% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 25% to 51% over the past 5 years.

What does this mean?

Compagnie Générale des Établissements Michelin'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 volatile earnings, can have many factors affecting its business. You should continue to research Compagnie Générale des Établissements Michelin to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for ML’s future growth? Take a look at our free research report of analyst consensus for ML’s outlook.
  2. Financial Health: Are ML’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 2018. 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.