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Today I will take a look at Industria de Diseño Textil, S.A.'s (BME:ITX) most recent earnings update (31 January 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the specialty retail industry performed. As an investor, I find it beneficial to assess ITX’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did ITX beat its long-term earnings growth trend and its industry?
ITX's trailing twelve-month earnings (from 31 January 2019) of €3.4b has increased by 2.3% 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 8.6%, indicating the rate at which ITX is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Industria de Diseño Textil has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 16% exceeds the ES Specialty Retail industry of 5.0%, indicating Industria de Diseño Textil has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Industria de Diseño Textil’s debt level, has declined over the past 3 years from 29% to 27%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.05% to 0.6% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Industria de Diseño Textil has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Industria de Diseño Textil to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ITX’s future growth? Take a look at our free research report of analyst consensus for ITX’s outlook.
- Financial Health: Are ITX’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 January 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.