For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Gefran S.p.A. (BIT:GE) useful as an attempt to give more color around how Gefran is currently performing.
Did GE beat its long-term earnings growth trend and its industry?
GE's trailing twelve-month earnings (from 30 June 2019) of €8.1m has jumped 25% 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 58%, indicating the rate at which GE is growing has slowed down. What could be happening here? Well, let's examine what's going on with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Gefran has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 5.1% is below the IT Electronic industry of 6.0%, indicating Gefran's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Gefran’s debt level, has increased over the past 3 years from 3.1% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 72% to 55% over the past 5 years.
What does this mean?
Gefran's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as Gefran gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Gefran to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GE’s future growth? Take a look at our free research report of analyst consensus for GE’s outlook.
- Financial Health: Are GE’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.
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 firstname.lastname@example.org. 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.