Was Alstom SA's (EPA:ALO) Earnings Growth Better Than The Industry's?

Simply Wall St

Investors with a long-term horizong may find it valuable to assess Alstom SA's (EPA:ALO) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Alstom is currently performing.

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

ALO's trailing twelve-month earnings (from 31 March 2019) of €433m has jumped 38% 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 38%, indicating the rate at which ALO is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the rest of the industry is feeling the heat.

ENXTPA:ALO Income Statement, May 18th 2019

In terms of returns from investment, Alstom has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 3.6% is below the FR Machinery industry of 4.6%, indicating Alstom's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Alstom’s debt level, has increased over the past 3 years from 5.6% to 10%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 111% to 32% over the past 5 years.

What does this mean?

Though Alstom's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Alstom gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Alstom to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for ALO’s future growth? Take a look at our free research report of analyst consensus for ALO’s outlook.
  2. Financial Health: Are ALO’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 31 March 2019. 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.