U.S. Markets open in 4 hrs 14 mins
  • S&P Futures

    4,065.50
    +60.75 (+1.52%)
     
  • Dow Futures

    32,513.00
    +354.00 (+1.10%)
     
  • Nasdaq Futures

    12,500.50
    +255.75 (+2.09%)
     
  • Russell 2000 Futures

    1,811.40
    +29.00 (+1.63%)
     
  • Crude Oil

    114.45
    +0.25 (+0.22%)
     
  • Gold

    1,826.90
    +12.90 (+0.71%)
     
  • Silver

    21.83
    +0.27 (+1.27%)
     
  • EUR/USD

    1.0484
    +0.0046 (+0.4403%)
     
  • 10-Yr Bond

    2.8770
    0.0000 (0.00%)
     
  • Vix

    26.82
    -2.05 (-7.10%)
     
  • GBP/USD

    1.2481
    +0.0157 (+1.2768%)
     
  • USD/JPY

    129.2570
    +0.2040 (+0.1581%)
     
  • BTC-USD

    30,583.88
    +937.00 (+3.16%)
     
  • CMC Crypto 200

    686.92
    +444.24 (+183.06%)
     
  • FTSE 100

    7,510.62
    +45.82 (+0.61%)
     
  • Nikkei 225

    26,659.75
    +112.70 (+0.42%)
     

Should You Be Happy With Famur SA’s (WSE:FMF) Performance Lately?

  • Oops!
    Something went wrong.
    Please try again later.
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Famur SA (WSE:FMF) useful as an attempt to give more color around how Famur is currently performing.

Check out our latest analysis for Famur

Commentary On FMF’s Past Performance

FMF’s trailing twelve-month earnings (from 31 March 2018) of zł45.8m has more than halved from zł93.8m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -17.7%, indicating the rate at which FMF is growing has slowed down. What could be happening here? Well, let’s look at what’s going on with margins and whether the entire industry is facing the same headwind.

Although revenue growth in the last couple of years, has been negative, earnings growth has been declining by even more, meaning Famur has been ramping up its expenses. This hurts margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the PL machinery industry has been enduring some headwinds over the last few years, leading to an average earnings drop of -5.8% in the most recent year. This growth is a median of profitable companies of 10 Machinery companies in PL including Newag, Aztec International and Fabryka Obrabiarek RAFAMET. This means that any headwind the industry is experiencing, it’s hitting Famur harder than its peers.

WSE:FMF Income Statement Export August 29th 18
WSE:FMF Income Statement Export August 29th 18

In terms of returns from investment, Famur has fallen short of achieving a 20% return on equity (ROE), recording 3.8% instead. Furthermore, its return on assets (ROA) of 2.0% is below the PL Machinery industry of 3.9%, indicating Famur’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Famur’s debt level, has declined over the past 3 years from 13.2% to 4.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 14.9% to 32.2% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Usually companies that face an extended period of diminishing 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 shift, which makes Famur and its peers a riskier investment. I recommend you continue to research Famur to get a better picture of the stock by looking at:

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

  2. Financial Health: Are FMF’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 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.