Yahoo Finance Devro plc's (LON:DVO) Earnings Dropped -20%, How Did It Fare Against The Industry?
When Devro plc (LON:DVO) released its most recent earnings update (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Devro's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not DVO actually performed well. Below is a quick commentary on how I see DVO has performed.
View our latest analysis for Devro
How Did DVO's Recent Performance Stack Up Against Its Past?
DVO's trailing twelve-month earnings (from 31 December 2018) of UK£13m has declined by -20% 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 -13%, indicating the rate at which DVO is growing has slowed down. Why could this be happening? Let's examine what's going on with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, Devro has fallen short of achieving a 20% return on equity (ROE), recording 8.5% instead. Furthermore, its return on assets (ROA) of 4.7% is below the GB Food industry of 5.3%, indicating Devro's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Devro’s debt level, has increased over the past 3 years from 9.7% to 10%.
What does this mean?
Though Devro's past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that experience a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes Devro and its peers a higher risk investment. I recommend you continue to research Devro to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for DVO’s future growth? Take a look at our free research report of analyst consensus for DVO’s outlook.
Financial Health: Are DVO’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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