In this commentary, I will examine Givaudan SA's (VTX:GIVN) latest earnings update (31 December 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the chemicals industry performed. As an investor, I find it beneficial to assess GIVN’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
See our latest analysis for Givaudan
Did GIVN perform worse than its track record and industry?
GIVN's trailing twelve-month earnings (from 31 December 2018) of CHF663m has declined by -7.9% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 6.5%, indicating the rate at which GIVN is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Givaudan has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. Furthermore, its return on assets (ROA) of 7.6% is below the CH Chemicals industry of 8.9%, indicating Givaudan's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Givaudan’s debt level, has declined over the past 3 years from 14% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 39% to 88% over the past 5 years.
What does this mean?
Givaudan's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. You should continue to research Givaudan to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for GIVN’s future growth? Take a look at our free research report of analyst consensus for GIVN’s outlook.
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Financial Health: Are GIVN’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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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.
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