After reading LEM Holding SA’s (SWX:LEHN) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for LEM Holding
How LEHN fared against its long-term earnings performance and its industry
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique enables me to analyze various companies on a more comparable basis, using the most relevant data points. For LEM Holding, its most recent earnings (trailing twelve month) is CHF49.97M, which compared to the prior year’s figure, has moved up by 11.81%. Given that these values are relatively short-term thinking, I have created an annualized five-year figure for LEHN’s net income, which stands at CHF40.44M This shows that, on average, LEM Holding has been able to consistently improve its net income over the past few years as well.
How has it been able to do this? Let’s take a look at whether it is only a result of an industry uplift, or if LEM Holding has seen some company-specific growth. Over the last few years, LEM Holding expanded its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Inspecting growth from a sector-level, the CH electronic industry has been growing its average earnings by double-digit 29.58% in the past year, and 11.37% over the previous five years. This means that any tailwind the industry is benefiting from, LEM Holding has not been able to reap as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research LEM Holding to get a more holistic view of the stock by looking at:
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1. Future Outlook: What are well-informed industry analysts predicting for LEHN’s future growth? Take a look at our free research report of analyst consensus for LEHN’s outlook.
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2. Financial Health: Is LEHN’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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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 31 December 2017. 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.