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Was HeidelbergCement AG's (ETR:HEI) Earnings Decline Part Of A Broader Industry Downturn?

Simply Wall St

Examining HeidelbergCement AG's (XTRA:HEI) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess HEI's latest performance announced on 30 June 2019 and weight these figures against its longer term trend and industry movements.

View our latest analysis for HeidelbergCement

Was HEI's recent earnings decline indicative of a tough track record?

HEI's trailing twelve-month earnings (from 30 June 2019) of €999m has declined by -5.2% 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 13%, indicating the rate at which HEI is growing has slowed down. What could be happening here? Well, let's look at what's transpiring with margins and if the entire industry is experiencing the hit as well.

XTRA:HEI Income Statement, November 9th 2019

In terms of returns from investment, HeidelbergCement has fallen short of achieving a 20% return on equity (ROE), recording 6.8% instead. Furthermore, its return on assets (ROA) of 3.4% is below the DE Basic Materials industry of 6.0%, indicating HeidelbergCement's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for HeidelbergCement’s debt level, has declined over the past 3 years from 6.7% to 5.8%.

What does this mean?

Though HeidelbergCement's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I suggest you continue to research HeidelbergCement to get a more holistic view of the stock by looking at:

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