Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Industria de Diseño Textil, S.A.'s (BME:ITX) 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.
Could ITX beat the long-term trend and outperform its industry?
ITX's trailing twelve-month earnings (from 31 July 2019) of €3.6b has increased by 5.1% 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 7.9%, indicating the rate at which ITX is growing has slowed down. Why could this be happening? Well, let's examine what's going on with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, Industria de Diseño Textil has invested its equity funds well leading to a 28% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the ES Specialty Retail industry of 4.1%, 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 31% to 24%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.07% to 0.6% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Industria de Diseño Textil to get a more holistic view 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 July 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.