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Malmbergs Elektriska AB (publ) (STO:MEAB B): Does The -12% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St

Measuring Malmbergs Elektriska AB (publ)'s (OM:MEAB B) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess MEAB B's recent performance announced on 31 December 2019 and weigh these figures against its long-term trend and industry movements.

See our latest analysis for Malmbergs Elektriska

Commentary On MEAB B's Past Performance

MEAB B's trailing twelve-month earnings (from 31 December 2019) of kr35m has declined by -12% 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 -18%, indicating the rate at which MEAB B is growing has slowed down. What could be happening here? Let's examine what's going on with margins and whether the whole industry is feeling the heat.

OM:MEAB B Income Statement April 9th 2020

In terms of returns from investment, Malmbergs Elektriska has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 6.6% is below the SE Trade Distributors industry of 7.4%, indicating Malmbergs Elektriska's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Malmbergs Elektriska’s debt level, has declined over the past 3 years from 30% to 11%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Usually companies that experience an extended period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the latest industry expansion and disruption. I suggest you continue to research Malmbergs Elektriska to get a more holistic view of the stock by looking at:

  1. Financial Health: Are MEAB B’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.
  2. Valuation: What is MEAB B worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MEAB B is currently mispriced by the market.
  3. 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 December 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 editorial-team@simplywallst.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.

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. Thank you for reading.