In this commentary, I will examine Pentair plc's (NYSE:PNR) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the machinery industry performed. As an investor, I find it beneficial to assess PNR’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
How Did PNR's Recent Performance Stack Up Against Its Past?
PNR's trailing twelve-month earnings (from 30 June 2019) of US$353m has jumped 46% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -19%, indicating the rate at which PNR is growing has accelerated. What's the driver of this growth? Well, let’s take a look at whether it is only because of an industry uplift, or if Pentair has experienced some company-specific growth.
In terms of returns from investment, Pentair has fallen short of achieving a 20% return on equity (ROE), recording 20% instead. However, its return on assets (ROA) of 9.1% exceeds the US Machinery industry of 7.7%, indicating Pentair has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Pentair’s debt level, has increased over the past 3 years from 7.4% to 13%.
What does this mean?
Though Pentair's past data is helpful, it is only one aspect of my investment thesis. While Pentair 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 Pentair to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PNR’s future growth? Take a look at our free research report of analyst consensus for PNR’s outlook.
- Financial Health: Are PNR’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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