Today I will examine Kaufman & Broad S.A.'s (ENXTPA:KOF) latest earnings update (29 February 2020) and compare these figures against its performance over the past couple of years, in addition to how the rest of KOF'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.

Check out our latest analysis for Kaufman & Broad

How KOF fared against its long-term earnings performance and its industry

KOF's trailing twelve-month earnings (from 29 February 2020) of €75m has increased by 2.9% 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 17%, indicating the rate at which KOF is growing has slowed down. To understand what's happening, let’s take a look at what’s occurring with margins and whether the rest of the industry is feeling the heat.

In terms of returns from investment, Kaufman & Broad has invested its equity funds well leading to a 30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 5.2% exceeds the FR Consumer Durables industry of 4.0%, indicating Kaufman & Broad has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Kaufman & Broad’s debt level, has declined over the past 3 years from 24% to 22%.

What does this mean?

Though Kaufman & Broad'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 Kaufman & Broad to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for KOF’s future growth? Take a look at our free research report of analyst consensus for KOF’s outlook.

2. Financial Health: Are KOF’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.

3. 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 29 February 2020. This may not be consistent with full year annual report figures.

Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.