When Middlesex Water Company (NASDAQ:MSEX) announced its most recent earnings (30 June 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Middlesex Water 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 MSEX has performed.
How Did MSEX's Recent Performance Stack Up Against Its Past?
MSEX's trailing twelve-month earnings (from 30 June 2019) of US$34m has jumped 30% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 13%, indicating the rate at which MSEX is growing has accelerated. What's the driver of this growth? Let's see whether it is merely owing to an industry uplift, or if Middlesex Water has seen some company-specific growth.
In terms of returns from investment, Middlesex Water has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 5.0% exceeds the US Water Utilities industry of 3.8%, indicating Middlesex Water has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Middlesex Water’s debt level, has declined over the past 3 years from 6.9% to 5.1%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 85% to 87% over the past 5 years.
What does this mean?
Middlesex Water's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Middlesex Water has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Middlesex Water to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MSEX’s future growth? Take a look at our free research report of analyst consensus for MSEX’s outlook.
- Financial Health: Are MSEX’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 30 June 2019. This may not be consistent with full year annual report figures.
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