Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Acme United Corporation's (AMEX:ACU) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Did ACU's recent earnings growth beat the long-term trend and the industry?
ACU's trailing twelve-month earnings (from 31 March 2020) of US$6.0m has jumped 29% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -1.1%, indicating the rate at which ACU is growing has accelerated. What's the driver of this growth? Well, let’s take a look at if it is only because of an industry uplift, or if Acme United has experienced some company-specific growth.
In terms of returns from investment, Acme United has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 7.0% exceeds the US Commercial Services industry of 5.6%, indicating Acme United has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Acme United’s debt level, has declined over the past 3 years from 9.5% to 9.4%.
What does this mean?
Though Acme United's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Acme United to get a more holistic view of the stock by looking at:
- Financial Health: Are ACU’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.
- Valuation: What is ACU worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ACU is currently mispriced by the market.
- 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 March 2020. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.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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