After looking at Danone SA’s (EPA:BN) latest earnings announcement (30 June 2018), 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.
How BN fared against its long-term earnings performance and its industry
BN’s trailing twelve-month earnings (from 30 June 2018) of €2.7b has jumped 47% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 15%, indicating the rate at which BN is growing has accelerated. What’s enabled this growth? Let’s see whether it is solely because of industry tailwinds, or if Danone has experienced some company-specific growth.
In terms of returns from investment, Danone has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 6.5% exceeds the FR Food industry of 4.3%, indicating Danone has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Danone’s debt level, has declined over the past 3 years from 12% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 100% to 127% over the past 5 years.
What does this mean?
Danone’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Danone to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BN’s future growth? Take a look at our free research report of analyst consensus for BN’s outlook.
- Financial Health: Are BN’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.