Today I will examine Zalando SE's (XTRA:ZAL) latest earnings update (30 September 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of ZAL'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.
How ZAL fared against its long-term earnings performance and its industry
ZAL's trailing twelve-month earnings (from 30 September 2019) of €71m has jumped 26% 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 ZAL is growing has accelerated. What's enabled this growth? Well, let’s take a look at if it is solely owing to industry tailwinds, or if Zalando has experienced some company-specific growth.
In terms of returns from investment, Zalando has fallen short of achieving a 20% return on equity (ROE), recording 4.4% instead. Furthermore, its return on assets (ROA) of 2.0% is below the DE Online Retail industry of 6.0%, indicating Zalando's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Zalando’s debt level, has declined over the past 3 years from 13% to 8.6%.
What does this mean?
Though Zalando's past data is helpful, it is only one aspect of my investment thesis. While Zalando has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. You should continue to research Zalando to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ZAL’s future growth? Take a look at our free research report of analyst consensus for ZAL’s outlook.
- Financial Health: Are ZAL’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 September 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 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.
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