Examining Advance Auto Parts, Inc.'s (NYSE:AAP) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess AAP's latest performance announced on 13 July 2019 and weight these figures against its longer term trend and industry movements.
How Did AAP's Recent Performance Stack Up Against Its Past?
AAP's trailing twelve-month earnings (from 13 July 2019) of US$437m has declined by -18% 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 -0.9%, indicating the rate at which AAP is growing has slowed down. Why could this be happening? Well, let's look at what's occurring with margins and if the rest of the industry is feeling the heat.
In terms of returns from investment, Advance Auto Parts has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 4.3% is below the US Specialty Retail industry of 5.6%, indicating Advance Auto Parts's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Advance Auto Parts’s debt level, has declined over the past 3 years from 20% to 10%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that endure an extended period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and expansion. I suggest you continue to research Advance Auto Parts to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AAP’s future growth? Take a look at our free research report of analyst consensus for AAP’s outlook.
- Financial Health: Are AAP’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 13 July 2019. This may not be consistent with full year annual report figures.
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