Examining Grupa Azoty Zaklady Chemiczne Police SA.’s (WSE:PCE) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess PCE’s latest performance announced on 30 September 2017 and weight these figures against its longer term trend and industry movements. See our latest analysis for Grupa Azoty Zaklady Chemiczne Police
Was PCE’s weak performance lately a part of a long-term decline?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique allows me to analyze many different companies in a uniform manner using the latest information. For Grupa Azoty Zaklady Chemiczne Police, its latest earnings (trailing twelve month) is ZŁ115.78M, which, in comparison to the previous year’s level, has plunged by -10.90%. Given that these values are fairly myopic, I’ve estimated an annualized five-year figure for Grupa Azoty Zaklady Chemiczne Police’s earnings, which stands at ZŁ129.35M This doesn’t look much better, as earnings seem to have gradually been deteriorating over the longer term.
Why is this? Well, let’s look at what’s going on with margins and whether the rest of the industry is facing the same headwind. Although revenue growth over the last couple of years, has been negative, earnings growth has been declining by even more, implying that Grupa Azoty Zaklady Chemiczne Police has been growing its expenses. This harms margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the PL chemicals industry has been enduring some headwinds in the previous twelve months, leading to an average earnings drop of -15.15%. This is a significant change, given that the industry has constantly been delivering a a strong growth of 10.74% in the past five years. This shows that any near-term headwind the industry is enduring, Grupa Azoty Zaklady Chemiczne Police is relatively better-cushioned than its peers.
What does this mean?
Though Grupa Azoty Zaklady Chemiczne Police’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that endure an extended period of decline in earnings are undergoing some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes Grupa Azoty Zaklady Chemiczne Police and its peers a riskier investment. You should continue to research Grupa Azoty Zaklady Chemiczne Police to get a better picture of the stock by looking at: