Iberdrola SA (BME:IBE): Has Recent Earnings Growth Beaten Long-Term Trend?
When Iberdrola SA (BME:IBE) released its most recent earnings update (30 June 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 Iberdrola 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 IBE has performed.
Check out our latest analysis for Iberdrola
Did IBE beat its long-term earnings growth trend and its industry?
IBE’s trailing twelve-month earnings (from 30 June 2018) of €2.9b has increased by 2.9% 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 4.3%, indicating the rate at which IBE is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Iberdrola has fallen short of achieving a 20% return on equity (ROE), recording 7.8% instead. Furthermore, its return on assets (ROA) of 3.4% is below the ES Electric Utilities industry of 4.8%, indicating Iberdrola’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Iberdrola’s debt level, has declined over the past 3 years from 3.6% to 2.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 78% to 86% over the past 5 years.
What does this mean?
Though Iberdrola’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Iberdrola to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for IBE’s future growth? Take a look at our free research report of analyst consensus for IBE’s outlook.
Financial Health: Are IBE’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 30 June 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.
