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Where Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros SA’s (BME:BME) Earnings Growth Stands Against Its Industry

For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros SA (BME:BME) useful as an attempt to give more color around how Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros is currently performing.

Check out our latest analysis for Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros

Was BME’s weak performance lately a part of a long-term decline?

BME’s trailing twelve-month earnings (from 30 June 2018) of €144m has declined by -6.6% 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 0.9%, indicating the rate at which BME is growing has slowed down. Why is this? 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.

BME:BME Income Statement Export October 31st 18

In terms of returns from investment, Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros has invested its equity funds well leading to a 33% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 0.9% is below the ES Capital Markets industry of 3.1%, indicating Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros’s are utilized less efficiently. Furthermore, its return on capital (ROC), which also accounts for Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros’s debt level, has declined over the past 3 years from 54% to 42%.

What does this mean?

Though Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that endure a prolonged period of reduction in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. You should continue to research Bolsas y Mercados Españoles Sociedad Holding de Mercados y Sistemas Financieros to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BME’s future growth? Take a look at our free research report of analyst consensus for BME’s outlook.
  2. Financial Health: Are BME’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 30 June 2018. This may not be consistent with full year annual report figures.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.