After looking at Chesapeake Utilities Corporation's (NYSE:CPK) latest earnings announcement (30 June 2019), 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 tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
How Did CPK's Recent Performance Stack Up Against Its Past?
CPK's trailing twelve-month earnings (from 30 June 2019) of US$60m has declined by -8.9% 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 12%, indicating the rate at which CPK is growing has slowed down. Why is this? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Chesapeake Utilities has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 4.8% exceeds the US Gas Utilities industry of 4.4%, indicating Chesapeake Utilities has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Chesapeake Utilities’s debt level, has declined over the past 3 years from 9.7% to 9.0%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 74% to 120% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. I suggest you continue to research Chesapeake Utilities to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CPK’s future growth? Take a look at our free research report of analyst consensus for CPK’s outlook.
- Financial Health: Are CPK’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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