After reading Iren SpA’s (BIT:IRE) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Iren’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Iren
Could IRE beat the long-term trend and outperform its industry?
IRE’s trailing twelve-month earnings (from 31 March 2018) of €240.33m has jumped 15.82% 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 23.22%, indicating the rate at which IRE is growing has slowed down. Why could this be happening? Well, let’s look at what’s going on with margins and if the rest of the industry is feeling the heat.
Over the past few years, revenue growth has been lagging behind earnings, which suggests that Iren’s bottom line has been driven by unsustainable cost-reductions. Eyeballing growth from a sector-level, the IT integrated utilities industry has been growing its average earnings by double-digit 15.82% over the prior twelve months, and 11.49% over the past five years.
In terms of returns from investment, Iren has not invested its equity funds well, leading to a 10.81% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 3.73% exceeds the IT Integrated Utilities industry of 3.41%, indicating Iren has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Iren’s debt level, has increased over the past 3 years from 4.14% to 5.87%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 143.52% to 128.64% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Iren gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Iren to get a more holistic view of the stock by looking at:
- 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.
- Financial Health: Is 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.
- 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 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.