Understanding how Terna – Rete Elettrica Nazionale Società per Azioni (BIT:TRN) 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 Terna – Rete Elettrica Nazionale Società per Azioni is doing by comparing its latest earnings with its long-term trend as well as the performance of its electric utilities industry peers.
Could TRN beat the long-term trend and outperform its industry?
TRN’s trailing twelve-month earnings (from 30 June 2018) of €697.2m has increased by 5.7% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 9.8%, indicating the rate at which TRN is growing has slowed down. To understand what’s happening, let’s take a look at what’s occurring with margins and whether the rest of the industry is feeling the heat.
Over the past couple of years, revenue growth has been lagging behind which suggests that Terna – Rete Elettrica Nazionale Società per Azioni’s bottom line has been driven by unmaintainable cost-reductions. Inspecting growth from a sector-level, the IT electric utilities industry has been relatively flat in terms of earnings growth over the past few years. Since the Electric Utilities sector in IT is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as Enel, and . This means whatever near-term headwind the industry is facing, the impact on Terna – Rete Elettrica Nazionale Società per Azioni has been softer relative to its peers.
In terms of returns from investment, Terna – Rete Elettrica Nazionale Società per Azioni has fallen short of achieving a 20% return on equity (ROE), recording 18.2% instead. However, its return on assets (ROA) of 4.8% exceeds the IT Electric Utilities industry of 4.7%, indicating Terna – Rete Elettrica Nazionale Società per Azioni has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Terna – Rete Elettrica Nazionale Società per Azioni’s debt level, has increased over the past 3 years from 7.2% to 8.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 315% to 231% over the past 5 years.
What does this mean?
Terna – Rete Elettrica Nazionale Società per Azioni’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as Terna – Rete Elettrica Nazionale Società per Azioni gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Terna – Rete Elettrica Nazionale Società per Azioni to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TRN’s future growth? Take a look at our free research report of analyst consensus for TRN’s outlook.
- Financial Health: Are TRN’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 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.