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Design Hotels AG's (FRA:LBA) Earnings Grew 21%, Did It Beat Long-Term Trend?

Simply Wall St

When Design Hotels AG (FRA:LBA) announced its most recent earnings (31 December 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Design Hotels performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see LBA has performed.

See our latest analysis for Design Hotels

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

LBA's trailing twelve-month earnings (from 31 December 2018) of €2.3m has jumped 21% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 19%, indicating the rate at which LBA is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is solely due to an industry uplift, or if Design Hotels has seen some company-specific growth.

DB:LBA Income Statement, July 30th 2019

In terms of returns from investment, Design Hotels has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 12% exceeds the DE Media industry of 4.9%, indicating Design Hotels has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Design Hotels’s debt level, has increased over the past 3 years from 20% to 26%.

What does this mean?

Though Design Hotels'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 Design Hotels to get a better picture of the stock by looking at:

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