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Today I will examine Topdanmark A/S's (CPH:TOP) latest earnings update (31 March 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of TOP'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.
Was TOP weak performance lately part of a long-term decline?
TOP's trailing twelve-month earnings (from 31 March 2019) of ø1.5b has declined by -5.2% 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 2.5%, indicating the rate at which TOP is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Topdanmark 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 1.7% exceeds the DK Insurance industry of 1.3%, indicating Topdanmark has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Topdanmark’s debt level, has increased over the past 3 years from 2.7% to 2.7%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 52% to 40% over the past 5 years.
What does this mean?
Topdanmark's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I suggest you continue to research Topdanmark to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TOP’s future growth? Take a look at our free research report of analyst consensus for TOP’s outlook.
- Financial Health: Are TOP’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 March 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.