Understanding how Mersen SA (ENXTPA:MRN) is performing as a company requires looking at more than just a years' earnings. Today I will run you through a basic sense check to gain perspective on how Mersen is doing by comparing its latest earnings with its long-term trend as well as the performance of its electrical industry peers.
Have MRN's earnings improved against past performances and the industry?
MRN's trailing twelve-month earnings (from 31 December 2019) of €57m has increased by 1.4% 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 50%, indicating the rate at which MRN is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Mersen has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 5.7% exceeds the FR Electrical industry of 5.7%, indicating Mersen has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Mersen’s debt level, has increased over the past 3 years from 7.3% to 10%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 57% to 49% over the past 5 years.
What does this mean?
Though Mersen'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? You should continue to research Mersen to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MRN’s future growth? Take a look at our free research report of analyst consensus for MRN’s outlook.
Financial Health: Are MRN’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.
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 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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