Want To Invest In Swisscom AG (VTX:SCMN)? Here’s How It Performed Lately
In this article, I will take a look at Swisscom AG’s (VTX:SCMN) most recent earnings update (31 March 2018) and compare these latest figures against its performance over the past few years, along with how the rest of SCMN’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. See our latest analysis for Swisscom
Was SCMN’s weak performance lately a part of a long-term decline?
SCMN’s trailing twelve-month earnings (from 31 March 2018) of CHF1.58b has declined by -2.11% 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 3.36%, indicating the rate at which SCMN is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and whether the entire industry is facing the same headwind.
In the past couple of years, revenue growth has failed to keep up which implies that Swisscom’s bottom line has been propelled by unsustainable cost-cutting. Inspecting growth from a sector-level, the CH telecom industry has been amplifying growth, more than doubling average earnings in the past twelve months, and a more muted 3.36% over the past five. This means any tailwind the industry is benefiting from, Swisscom has not been able to gain as much as its industry peers.
In terms of returns from investment, Swisscom has not invested its equity funds well, leading to a 18.74% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 7.46% exceeds the CH Telecom industry of 6.57%, indicating Swisscom has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Swisscom’s debt level, has declined over the past 3 years from 12.75% to 10.79%.
What does this mean?
Swisscom’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 unpredictable earnings, can have many factors impacting its business. I suggest you continue to research Swisscom to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SCMN’s future growth? Take a look at our free research report of analyst consensus for SCMN’s outlook.
Financial Health: Is SCMN’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 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.