When Evotec SE (XTRA:EVT) released its most recent earnings update (30 September 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Evotec's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not EVT actually performed well. Below is a quick commentary on how I see EVT has performed.
Was EVT's recent earnings decline worse than the long-term trend and the industry?
EVT's trailing twelve-month earnings (from 30 September 2019) of €61m has declined by -2.3% 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 53%, indicating the rate at which EVT is growing has slowed down. Why could this be happening? Let's examine what's going on with margins and if the entire industry is feeling the heat.
In terms of returns from investment, Evotec has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 6.1% is below the DE Life Sciences industry of 6.8%, indicating Evotec's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Evotec’s debt level, has declined over the past 3 years from 11% to 7.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 14% to 69% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I recommend you continue to research Evotec to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EVT’s future growth? Take a look at our free research report of analyst consensus for EVT’s outlook.
- Financial Health: Are EVT’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 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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