Today I will examine Axfood AB (publ)'s (OM:AXFO) latest earnings update (31 December 2019) and compare these figures against its performance over the past couple of years, in addition to how the rest of AXFO's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Did AXFO beat its long-term earnings growth trend and its industry?
AXFO's trailing twelve-month earnings (from 31 December 2019) of kr1.6b has increased by 6.1% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.9%, indicating the rate at which AXFO is growing has accelerated. What's enabled this growth? Well, let’s take a look at if it is merely a result of industry tailwinds, or if Axfood has experienced some company-specific growth.
In terms of returns from investment, Axfood has invested its equity funds well leading to a 39% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 10% exceeds the SE Consumer Retailing industry of 5.6%, indicating Axfood has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Axfood’s debt level, has declined over the past 3 years from 36% to 24%.
What does this mean?
Axfood's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as Axfood gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Axfood to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AXFO’s future growth? Take a look at our free research report of analyst consensus for AXFO’s outlook.
- Financial Health: Are AXFO’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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