Yahoo Finance How Orange SA’s (EPA:ORA) Earnings Growth Stacks Up Against The Industry
In this article, I will take a look at Orange SA’s (EPA:ORA) most recent earnings update (30 June 2018) and compare these latest figures against its performance over the past few years, along with how the rest of ORA’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.
View our latest analysis for Orange
Did ORA beat its long-term earnings growth trend and its industry?
ORA’s trailing twelve-month earnings (from 30 June 2018) of €1.80b has more than doubled from €395.0m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -15.6%, indicating the rate at which ORA is growing has accelerated. What’s the driver of this growth? Let’s see whether it is only owing to industry tailwinds, or if Orange has seen some company-specific growth.
Although both top-line and bottom-line growth rates in the past couple of years were on average negative, earnings were more so. While this brought about a margin contraction, it has cushioned Orange’s earnings contraction. Scanning growth from a sector-level, the FR telecom industry has been growing, albeit, at a muted single-digit rate of 9.2% over the prior year, and 3.4% over the last five years. This growth is a median of profitable companies of 4 Telecom companies in FR including Néocom Multimédia, Iliad and Itissalat Al-Maghrib (IAM). This means whatever tailwind the industry is enjoying, Orange is able to amplify this to its advantage.
In terms of returns from investment, Orange has fallen short of achieving a 20% return on equity (ROE), recording 6.9% instead. Furthermore, its return on assets (ROA) of 3.5% is below the FR Telecom industry of 6.4%, indicating Orange’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Orange’s debt level, has increased over the past 3 years from 5.1% to 6.3%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 143% to 120% over the past 5 years.
What does this mean?
Though Orange’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Orange gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Orange to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ORA’s future growth? Take a look at our free research report of analyst consensus for ORA’s outlook.
Financial Health: Are ORA’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 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.
