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Examining Legrand SA's (EPA:LR) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess LR's latest performance announced on 31 March 2019 and weight these figures against its longer term trend and industry movements.
How Did LR's Recent Performance Stack Up Against Its Past?
LR's trailing twelve-month earnings (from 31 March 2019) of €787m has increased by 6.7% 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 9.9%, indicating the rate at which LR is growing has slowed down. What could be happening here? Well, let's examine what's going on with margins and if the rest of the industry is feeling the heat.
In terms of returns from investment, Legrand has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 7.8% exceeds the FR Electrical industry of 6.0%, indicating Legrand has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Legrand’s debt level, has declined over the past 3 years from 14% to 13%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 49% to 74% over the past 5 years.
What does this mean?
Though Legrand's past data is helpful, it is only one aspect of my investment thesis. While Legrand 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 Legrand to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LR’s future growth? Take a look at our free research report of analyst consensus for LR’s outlook.
- Financial Health: Are LR’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 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.