When Acuity Brands, Inc. (NYSE:AYI) released its most recent earnings update (29 February 2020), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Acuity Brands's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not AYI actually performed well. Below is a quick commentary on how I see AYI has performed.
Despite a decline, did AYI underperform the long-term trend and the industry?
AYI's trailing twelve-month earnings (from 29 February 2020) of US$299m has declined by -8.7% 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 8.3%, indicating the rate at which AYI is growing has slowed down. What could be happening here? Let's examine what's occurring with margins and if the rest of the industry is feeling the heat.
In terms of returns from investment, Acuity Brands has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 9.7% exceeds the US Electrical industry of 6.5%, indicating Acuity Brands has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Acuity Brands’s debt level, has declined over the past 3 years from 21% to 15%.
What does this mean?
Though Acuity Brands's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I recommend you continue to research Acuity Brands to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for AYI’s future growth? Take a look at our free research report of analyst consensus for AYI’s outlook.
Financial Health: Are AYI’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 29 February 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 firstname.lastname@example.org. 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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