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Does ORBIS AG's (ETR:OBS) 32% Earnings Growth Reflect The Long-Term Trend?

Simply Wall St

When ORBIS AG (ETR:OBS) released its most recent earnings update (31 December 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well ORBIS has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see OBS has performed.

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View our latest analysis for ORBIS

How OBS fared against its long-term earnings performance and its industry

OBS's trailing twelve-month earnings (from 31 December 2018) of €2.2m has jumped 32% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.1%, indicating the rate at which OBS is growing has accelerated. What's enabled this growth? Let's take a look at if it is only due to an industry uplift, or if ORBIS has seen some company-specific growth.

XTRA:OBS Income Statement, May 18th 2019

In terms of returns from investment, ORBIS has fallen short of achieving a 20% return on equity (ROE), recording 9.0% instead. Furthermore, its return on assets (ROA) of 4.5% is below the DE IT industry of 5.3%, indicating ORBIS's are utilized less efficiently. However, its return on capital (ROC), which also accounts for ORBIS’s debt level, has increased over the past 3 years from 6.9% to 10.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 2.1% to 0.3% over the past 5 years.

What does this mean?

While past data is useful, it 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 suggest you continue to research ORBIS to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for OBS’s future growth? Take a look at our free research report of analyst consensus for OBS’s outlook.
  2. Financial Health: Are OBS’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 2018. 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.