After looking at Design Hotels AG’s (FRA:LBA) latest earnings announcement (30 June 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Design Hotels’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
How Well Did LBA Perform?
LBA’s trailing twelve-month earnings (from 30 June 2018) of €2m has jumped 11% 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 31%, indicating the rate at which LBA is growing has slowed down. Why could this be happening? Well, let’s examine what’s transpiring with margins and if the whole industry is experiencing the hit as well.
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 8.0%, 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 21% to 27%.
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? I suggest you continue to research Design Hotels to get a better picture of the stock by looking at:
- 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.
- 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.
- 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 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.