Has EVS Broadcast Equipment SA (EBR:EVS) Improved Earnings In Recent Times?
When EVS Broadcast Equipment SA (EBR:EVS) announced its most recent earnings (31 March 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 EVS Broadcast Equipment 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 EVS has performed.
See our latest analysis for EVS Broadcast Equipment
Was EVS’s weak performance lately a part of a long-term decline?
EVS’s trailing twelve-month earnings (from 31 March 2018) of €22.48m has declined by -28.68% 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 -6.75%, indicating the rate at which EVS is growing has slowed down. Why is this? Well, let’s look at what’s transpiring with margins and if the entire industry is experiencing the hit as well.
Although revenue growth over the last few years, has been negative, earnings growth has been declining by even more, meaning EVS Broadcast Equipment has been growing its expenses. This harms margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the BE communications industry has been growing its average earnings by double-digit 10.66% over the prior year, and 13.06% over the past half a decade. Since the Communications sector in BE is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as Zenitel, and . This means that whatever uplift the industry is profiting from, EVS Broadcast Equipment has not been able to leverage it as much as its industry peers.
In terms of returns from investment, EVS Broadcast Equipment has invested its equity funds well leading to a 20.92% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14.63% exceeds the BE Communications industry of 5.30%, indicating EVS Broadcast Equipment has used its assets more efficiently. However, its return on capital (ROC), which also accounts for EVS Broadcast Equipment’s debt level, has declined over the past 3 years from 40.78% to 25.92%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 1.07% to 12.72% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that endure a drawn out period of diminishing earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and expansion. You should continue to research EVS Broadcast Equipment to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for EVS’s future growth? Take a look at our free research report of analyst consensus for EVS’s outlook.
Financial Health: Are EVS’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 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 editorial-team@simplywallst.com.
