In this article, I will take a look at Kering SA's (EPA:KER) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of KER'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 KER's recent earnings decline worse than the long-term trend and the industry?
KER's trailing twelve-month earnings (from 30 June 2019) of €2.0b has declined by -4.1% 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 27%, indicating the rate at which KER is growing has slowed down. Why is this? Well, let’s take a look at what’s occurring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, Kering has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.3% exceeds the FR Luxury industry of 6.5%, indicating Kering has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Kering’s debt level, has increased over the past 3 years from 8.8% to 25%.
What does this mean?
Though Kering's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I suggest you continue to research Kering to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for KER’s future growth? Take a look at our free research report of analyst consensus for KER’s outlook.
- Financial Health: Are KER’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 2019. This may not be consistent with full year annual report figures.
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