Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Brembo S.p.A.’s (BIT:BRE) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Did BRE perform worse than its track record and industry?
BRE’s trailing twelve-month earnings (from 31 December 2018) of €238m has declined by -9.5% 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 19%, indicating the rate at which BRE is growing has slowed down. What could be happening here? Well, let’s look at what’s going on with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, Brembo has fallen short of achieving a 20% return on equity (ROE), recording 20% instead. However, its return on assets (ROA) of 10.0% exceeds the IT Auto Components industry of 5.9%, indicating Brembo has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Brembo’s debt level, has declined over the past 3 years from 25% to 22%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Brembo to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BRE’s future growth? Take a look at our free research report of analyst consensus for BRE’s outlook.
- Financial Health: Are BRE’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 December 2018. This may not be consistent with full year annual report figures.
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