For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Paul Hartmann AG's (DB:PHH2) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
Despite a decline, did PHH2 underperform the long-term trend and the industry?
PHH2's trailing twelve-month earnings (from 30 June 2019) of €74m has declined by -13% 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 2.7%, indicating the rate at which PHH2 is growing has slowed down. Why is this? Let's examine what's going on with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, Paul Hartmann has fallen short of achieving a 20% return on equity (ROE), recording 8.7% instead. Furthermore, its return on assets (ROA) of 4.7% is below the DE Medical Equipment industry of 6.4%, indicating Paul Hartmann's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Paul Hartmann’s debt level, has declined over the past 3 years from 12% to 10%.
What does this mean?
Though Paul Hartmann's past data is helpful, it is only one aspect of my investment thesis. Typically companies that endure an extended period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. You should continue to research Paul Hartmann to get a better picture of the stock by looking at:
- Financial Health: Are PHH2’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.
- Valuation: What is PHH2 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 PHH2 is currently mispriced by the market.
- 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.
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.
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