Was ICA Gruppen AB (publ)’s (STO:ICA) Earnings Decline Part Of A Broader Industry Downturn?
After looking at ICA Gruppen AB (publ)’s (OM:ICA) latest earnings update (31 March 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. View our latest analysis for ICA Gruppen
Was ICA weak performance lately part of a long-term decline?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to assess various companies on a similar basis, using the most relevant data points. For ICA Gruppen, its most recent trailing-twelve-month earnings is KR3.70B, which compared to last year’s level, has plunged by -2.38%. Given that these figures are relatively short-term thinking, I have determined an annualized five-year figure for ICA Gruppen’s earnings, which stands at KR3.44B This means although earnings declined from last year, over the long run, ICA Gruppen’s earnings have been growing on average.
What’s the driver of this growth? Let’s take a look at whether it is merely a result of an industry uplift, or if ICA Gruppen has seen some company-specific growth. The climb in earnings seems to be propelled by a strong top-line increase outpacing its growth rate of costs. Though this brought about a margin contraction, it has made ICA Gruppen more profitable. Viewing growth from a sector-level, the SE consumer retailing industry has been growing its average earnings by double-digit 14.19% in the prior year, and a less exciting 5.44% over the last five years. This suggests that whatever uplift the industry is deriving benefit from, ICA Gruppen has not been able to reap as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. You should continue to research ICA Gruppen to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ICA’s future growth? Take a look at our free research report of analyst consensus for ICA’s outlook.
Financial Health: Is ICA’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 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.
