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For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on LyondellBasell Industries N.V. (NYSE:LYB) useful as an attempt to give more color around how LyondellBasell Industries is currently performing.
Was LYB weak performance lately part of a long-term decline?
LYB's trailing twelve-month earnings (from 31 March 2019) of US$4.3b has declined by -20% 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 3.7%, indicating the rate at which LYB is growing has slowed down. What could be happening here? Well, let’s take a look at what’s going on with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, LyondellBasell Industries has invested its equity funds well leading to a 42% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15% exceeds the US Chemicals industry of 7.1%, indicating LyondellBasell Industries has used its assets more efficiently. However, its return on capital (ROC), which also accounts for LyondellBasell Industries’s debt level, has declined over the past 3 years from 31% to 21%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 58% to 97% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research LyondellBasell Industries to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LYB’s future growth? Take a look at our free research report of analyst consensus for LYB’s outlook.
- Financial Health: Are LYB’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.