In this commentary, I will examine Jerónimo Martins, SGPS, S.A.’s (ELI:JMT) latest earnings update (30 September 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the consumer retailing industry performed. As an investor, I find it beneficial to assess JMT’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did JMT beat its long-term earnings growth trend and its industry?
JMT’s trailing twelve-month earnings (from 30 September 2018) of €392m has increased by 4.1% 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 6.4%, indicating the rate at which JMT is growing has slowed down. To understand what’s happening, let’s look at what’s going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Jerónimo Martins SGPS has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 6.5% exceeds the PT Consumer Retailing industry of 5.4%, indicating Jerónimo Martins SGPS has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Jerónimo Martins SGPS’s debt level, has increased over the past 3 years from 22% to 27%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 48% to 33% over the past 5 years.
What does this mean?
Though Jerónimo Martins SGPS’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Jerónimo Martins SGPS gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Jerónimo Martins SGPS to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for JMT’s future growth? Take a look at our free research report of analyst consensus for JMT’s outlook.
- Financial Health: Are JMT’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 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 firstname.lastname@example.org.