After reading Reno De Medici S.p.A.'s (BIT:RM) most recent earnings announcement (30 September 2019), 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 Reno De Medici's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Commentary On RM's Past Performance
RM's trailing twelve-month earnings (from 30 September 2019) of €26m has declined by -4.3% 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 27%, indicating the rate at which RM is growing has slowed down. Why is this? 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, Reno De Medici has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 5.5% is below the IT Packaging industry of 5.7%, indicating Reno De Medici's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Reno De Medici’s debt level, has increased over the past 3 years from 3.4% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 47% to 38% over the past 5 years.
What does this mean?
Though Reno De Medici'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 affecting its business. I suggest you continue to research Reno De Medici to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RM’s future growth? Take a look at our free research report of analyst consensus for RM’s outlook.
- Financial Health: Are RM’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 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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