Examining how Fortum Oyj (HLSE:FORTUM) is performing as a company requires looking at more than just a years' earnings. Below, I will run you through a simple sense check to build perspective on how Fortum Oyj is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its electric utilities industry peers.
Did FORTUM's recent performance beat its trend and industry?
FORTUM's trailing twelve-month earnings (from 30 June 2019) of €1.2b has declined by -0.8% 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 7.2%, indicating the rate at which FORTUM is growing has slowed down. Why is this? Well, let's look at what's going on with margins and whether the entire industry is facing the same headwind.
In terms of returns from investment, Fortum Oyj has fallen short of achieving a 20% return on equity (ROE), recording 9.6% instead. However, its return on assets (ROA) of 5.7% exceeds the FI Electric Utilities industry of 4.5%, indicating Fortum Oyj has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Fortum Oyj’s debt level, has increased over the past 3 years from 3.6% to 4.9%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 64% to 54% over the past 5 years.
What does this mean?
Fortum Oyj'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 capricious earnings, can have many factors impacting its business. I recommend you continue to research Fortum Oyj to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FORTUM’s future growth? Take a look at our free research report of analyst consensus for FORTUM’s outlook.
- Financial Health: Are FORTUM’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 30 June 2019. This may not be consistent with full year annual report figures.
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