When Suez SA (ENXTPA:SEV) released its most recent earnings update (30 June 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Suez has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see SEV has performed.
How SEV fared against its long-term earnings performance and its industry
SEV's trailing twelve-month earnings (from 30 June 2019) of €412m has jumped 35% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -4.0%, indicating the rate at which SEV is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is merely because of an industry uplift, or if Suez has experienced some company-specific growth.
In terms of returns from investment, Suez has fallen short of achieving a 20% return on equity (ROE), recording 7.7% instead. Furthermore, its return on assets (ROA) of 2.3% is below the FR Integrated Utilities industry of 2.9%, indicating Suez's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Suez’s debt level, has declined over the past 3 years from 5.9% to 5.0%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 134% to 140% over the past 5 years.
What does this mean?
Though Suez's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Suez gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Suez to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SEV’s future growth? Take a look at our free research report of analyst consensus for SEV’s outlook.
- Financial Health: Are SEV’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 30 June 2019. This may not be consistent with full year annual report figures.
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