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For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Recticel NV/SA (EBR:REC) useful as an attempt to give more color around how Recticel/SA is currently performing.
See our latest analysis for Recticel/SA
Could REC beat the long-term trend and outperform its industry?
REC's trailing twelve-month earnings (from 31 December 2018) of €29m has jumped 20% 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 69%, indicating the rate at which REC is growing has slowed down. To understand what's happening, let's examine what's going on with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Recticel/SA has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.4% is below the BE Chemicals industry of 5.4%, indicating Recticel/SA's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Recticel/SA’s debt level, has increased over the past 3 years from 6.4% to 8.4%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 89% to 46% over the past 5 years.
What does this mean?
Though Recticel/SA's past data is helpful, it is only one aspect of my investment thesis. 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 Recticel/SA to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for REC’s future growth? Take a look at our free research report of analyst consensus for REC’s outlook.
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Financial Health: Are REC’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.
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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 December 2018. 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 editorial-team@simplywallst.com. 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.