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After reading Hexagon AB (publ)'s (STO:HEXA B) most recent earnings announcement (31 December 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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 Hexagon's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Were HEXA B's earnings stronger than its past performances and the industry?
HEXA B's trailing twelve-month earnings (from 31 December 2018) of €730m has increased by 9.9% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 16%, indicating the rate at which HEXA B is growing has slowed down. What could be happening here? Well, let's look at what's occurring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, Hexagon has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. However, its return on assets (ROA) of 7.7% exceeds the SE Electronic industry of 7.6%, indicating Hexagon has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Hexagon’s debt level, has increased over the past 3 years from 11% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 56% to 44% over the past 5 years.
What does this mean?
Hexagon's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as Hexagon gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Hexagon to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HEXA B’s future growth? Take a look at our free research report of analyst consensus for HEXA B’s outlook.
- Financial Health: Are HEXA B’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 December 2018. 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 firstname.lastname@example.org. 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.