Sodexo S.A.'s (EPA:SW) Earnings Grew 2.2%, Did It Beat Long-Term Trend?
In this article, I will take a look at Sodexo S.A.'s (ENXTPA:SW) most recent earnings update (31 August 2019) and compare these latest figures against its performance over the past few years, along with how the rest of SW's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Check out our latest analysis for Sodexo
How Did SW's Recent Performance Stack Up Against Its Past?
SW's trailing twelve-month earnings (from 31 August 2019) of €665m has increased by 2.2% 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 3.1%, indicating the rate at which SW is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, Sodexo has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 4.3% exceeds the FR Hospitality industry of 3.3%, indicating Sodexo has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Sodexo’s debt level, has declined over the past 3 years from 15% to 12%.
What does this mean?
Though Sodexo's past data is helpful, it is only one aspect of my investment thesis. While Sodexo 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 Sodexo to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SW’s future growth? Take a look at our free research report of analyst consensus for SW’s outlook.
Financial Health: Are SW’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 August 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.
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