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Does Resilux NV's (EBR:RES) -8.7% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St

Investors with a long-term horizong may find it valuable to assess Resilux NV's (ENXTBR:RES) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Resilux is currently performing.

View our latest analysis for Resilux

Commentary On RES's Past Performance

RES's trailing twelve-month earnings (from 30 June 2019) of €16m has declined by -8.7% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 5.0%, indicating the rate at which RES is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is feeling the heat.

ENXTBR:RES Income Statement, October 12th 2019

In terms of returns from investment, Resilux has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 5.7% exceeds the BE Packaging industry of 5.7%, indicating Resilux has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Resilux’s debt level, has declined over the past 3 years from 25% to 15%.

What does this mean?

Resilux's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Generally companies that face a prolonged period of decline in earnings are going through some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a signal of a structural change, which makes Resilux and its peers a higher risk investment. You should continue to research Resilux to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for RES’s future growth? Take a look at our free research report of analyst consensus for RES’s outlook.
  2. Financial Health: Are RES’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 30 June 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.