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Has Renk Aktiengesellschaft (FRA:ZAR) Improved Earnings In Recent Times?

Simply Wall St

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Measuring Renk Aktiengesellschaft's (FRA:ZAR) 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 ZAR's recent performance announced on 31 December 2018 and weigh these figures against its long-term trend and industry movements.

Check out our latest analysis for Renk

Did ZAR perform better than its track record and industry?

ZAR's trailing twelve-month earnings (from 31 December 2018) of €43m has declined by -0.7% 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 -3.3%, indicating the rate at which ZAR 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 facing the same headwind.

DB:ZAR Income Statement, June 17th 2019

In terms of returns from investment, Renk has fallen short of achieving a 20% return on equity (ROE), recording 9.4% instead. However, its return on assets (ROA) of 5.4% exceeds the DE Auto Components industry of 4.5%, indicating Renk has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Renk’s debt level, has declined over the past 3 years from 15% to 11%.

What does this mean?

Renk's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Typically companies that experience a drawn out period of decline in earnings are undergoing some sort of reinvestment phase Although, if the whole industry is struggling to grow over time, it may be a signal of a structural shift, which makes Renk and its peers a higher risk investment. I recommend you continue to research Renk to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for ZAR’s future growth? Take a look at our free research report of analyst consensus for ZAR’s outlook.
  2. Financial Health: Are ZAR’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.
  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 2018. 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 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. Thank you for reading.