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Should You Be Concerned With Soitec S.A.'s (EPA:SOI) -2.4% Earnings Drop?

Simply Wall St

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When Soitec S.A. (EPA:SOI) released its most recent earnings update (31 March 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Soitec's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not SOI actually performed well. Below is a quick commentary on how I see SOI has performed.

View our latest analysis for Soitec

How Well Did SOI Perform?

SOI recently turned a profit of €90m (most recent trailing twelve-months) compared to its average loss of -€57.1m over the past five years.

ENXTPA:SOI Income Statement, July 12th 2019

In terms of returns from investment, Soitec has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the FR Semiconductor industry of 5.6%, indicating Soitec has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Soitec’s debt level, has increased over the past 3 years from 13% to 18%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 116% to 46% over the past 5 years.

What does this mean?

Though Soitec's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. I suggest you continue to research Soitec to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for SOI’s future growth? Take a look at our free research report of analyst consensus for SOI’s outlook.
  2. Financial Health: Are SOI’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 March 2019. 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.