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Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess ALLETE, Inc.’s (NYSE:ALE) 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.
Have ALE’s earnings improved against past performances and the industry?
ALE’s trailing twelve-month earnings (from 31 December 2018) of US$174m has increased by 1.1% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 9.3%, indicating the rate at which ALE is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the whole industry is feeling the heat.
In terms of returns from investment, ALLETE has fallen short of achieving a 20% return on equity (ROE), recording 8.1% instead. However, its return on assets (ROA) of 4.7% exceeds the US Electric Utilities industry of 4.2%, indicating ALLETE has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for ALLETE’s debt level, has declined over the past 3 years from 5.4% to 4.4%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research ALLETE to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ALE’s future growth? Take a look at our free research report of analyst consensus for ALE’s outlook.
- Financial Health: Are ALE’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 31 December 2018. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.