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Givaudan SA's (VTX:GIVN) Earnings Grew 5.9%, Is It Enough?

Simply Wall St

After looking at Givaudan SA's (SWX:GIVN) latest earnings announcement (31 December 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. 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 Givaudan's performance has been impacted by industry movements. In this article I briefly touch on my key findings.

Check out our latest analysis for Givaudan

Were GIVN's earnings stronger than its past performances and the industry?

GIVN's trailing twelve-month earnings (from 31 December 2019) of CHF702m has increased by 5.9% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 3.4%, indicating the rate at which GIVN is growing has accelerated. What's enabled this growth? Let's see whether it is merely a result of industry tailwinds, or if Givaudan has experienced some company-specific growth.

SWX:GIVN Income Statement May 10th 2020

In terms of returns from investment, Givaudan has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. Furthermore, its return on assets (ROA) of 7.4% is below the CH Chemicals industry of 8.1%, indicating Givaudan's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Givaudan’s debt level, has declined over the past 3 years from 15% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 35% to 101% over the past 5 years.

What does this mean?

Givaudan's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Givaudan has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Givaudan to get a better picture of the stock by looking at:

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

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. Thank you for reading.