When Ørsted A/S ( CPH:ORSTED ) released its most recent earnings update (31 December 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Ørsted 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 ORSTED has performed.
How Well Did ORSTED Perform?
ORSTED's trailing twelve-month earnings (from 31 December 2018) of ø18b has jumped 41% 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 54%, indicating the rate at which ORSTED is growing has slowed down. To understand what's happening, let’s take a look at what’s transpiring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Ørsted has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the DK Electric Utilities industry of 4.5%, indicating Ørsted has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Ørsted’s debt level, has increased over the past 3 years from 3.4% to 5.6%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 90% to 32% over the past 5 years.
What does this mean?
Ørsted's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Ørsted has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Ørsted to get a more holistic view of the stock by looking at:
- Future Outlook : What are well-informed industry analysts predicting for ORSTED’s future growth? Take a look at our free research report of analyst consensus for ORSTED’s outlook.
- Financial Health : Are ORSTED’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 2018. This may not be consistent with full year annual report figures.
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