With A -20% Earnings Drop, Is Tarkett S.A.'s (EPA:TKTT) A Concern?
Assessing Tarkett S.A.'s (ENXTPA:TKTT) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess TKTT's latest performance announced on 31 December 2019 and evaluate these figures to its historical trend and industry movements.
See our latest analysis for Tarkett
Was TKTT weak performance lately part of a long-term decline?
TKTT's trailing twelve-month earnings (from 31 December 2019) of €40m has declined by -20% 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 -17%, indicating the rate at which TKTT is growing has slowed down. What could be happening here? Well, let's look at what's transpiring with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Tarkett has fallen short of achieving a 20% return on equity (ROE), recording 4.7% instead. Furthermore, its return on assets (ROA) of 2.5% is below the FR Building industry of 3.7%, indicating Tarkett's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Tarkett’s debt level, has declined over the past 3 years from 12% to 6.3%.
What does this mean?
Tarkett's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Usually companies that endure a drawn out period of reduction in earnings are undergoing some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Tarkett and its peers a higher risk investment. I suggest you continue to research Tarkett to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TKTT’s future growth? Take a look at our free research report of analyst consensus for TKTT’s outlook.
Financial Health: Are TKTT’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 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.
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