In this article, I will take a look at Lectra SA's (EPA:LSS) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of LSS's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Commentary On LSS's Past Performance
LSS's trailing twelve-month earnings (from 30 June 2019) of €29m has increased by 1.1% 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 14%, indicating the rate at which LSS is growing has slowed down. Why could this be happening? Well, let's examine what's going on with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Lectra has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 9.1% exceeds the FR Software industry of 4.7%, indicating Lectra has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Lectra’s debt level, has declined over the past 3 years from 28% to 21%.
What does this mean?
Lectra's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Lectra has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Lectra to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LSS’s future growth? Take a look at our free research report of analyst consensus for LSS’s outlook.
- Financial Health: Are LSS’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 2019. This may not be consistent with full year annual report figures.
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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. Thank you for reading.