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Should You Be Concerned With Iren SpA's (BIT:IRE) -2.3% Earnings Drop?

After looking at Iren SpA's (BIT:IRE) latest earnings announcement (31 December 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.

See our latest analysis for Iren

Was IRE weak performance lately part of a long-term decline?

IRE's trailing twelve-month earnings (from 31 December 2019) of €237m has declined by -2.3% 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 19%, indicating the rate at which IRE is growing has slowed down. Why is this? Well, let's look at what's transpiring with margins and whether the rest of the industry is feeling the heat.

BIT:IRE Income Statement April 13th 2020
BIT:IRE Income Statement April 13th 2020

In terms of returns from investment, Iren has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 4.3% exceeds the IT Integrated Utilities industry of 3.4%, indicating Iren has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Iren’s debt level, has declined over the past 3 years from 7.2% to 6.6%.

What does this mean?

Iren'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 affecting its business. I suggest you continue to research Iren to get a more holistic view of the stock by looking at:

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

  2. Financial Health: Are IRE’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 2019. This may not be consistent with full year annual report figures.

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.

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. Thank you for reading.

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