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After looking at Ingersoll-Rand Plc’s (NYSE:IR) latest earnings announcement (31 December 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 Ingersoll-Rand’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
How IR fared against its long-term earnings performance and its industry
IR’s trailing twelve-month earnings (from 31 December 2018) of US$1.4b has increased by 2.3% 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 18%, indicating the rate at which IR is growing has slowed down. What could be happening here? Well, let’s examine what’s transpiring with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, Ingersoll-Rand has fallen short of achieving a 20% return on equity (ROE), recording 20% instead. However, its return on assets (ROA) of 8.8% exceeds the US Machinery industry of 7.1%, indicating Ingersoll-Rand has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Ingersoll-Rand’s debt level, has increased over the past 3 years from 12% to 14%.
What does this mean?
Ingersoll-Rand’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 Ingersoll-Rand gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Ingersoll-Rand to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for IR’s future growth? Take a look at our free research report of analyst consensus for IR’s outlook.
- Financial Health: Are IR’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.
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 email@example.com.