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Assessing American Electric Power Company, Inc.'s (NYSE:AEP) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess AEP's recent performance announced on 31 March 2019 and evaluate these figures to its longer term trend and industry movements.
Commentary On AEP's Past Performance
AEP's trailing twelve-month earnings (from 31 March 2019) of US$2.0b has jumped 15% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 1.8%, indicating the rate at which AEP is growing has accelerated. What's enabled this growth? Let's take a look at whether it is only because of an industry uplift, or if American Electric Power Company has experienced some company-specific growth.
In terms of returns from investment, American Electric Power Company has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.3% is below the US Electric Utilities industry of 4.4%, indicating American Electric Power Company's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for American Electric Power Company’s debt level, has declined over the past 3 years from 5.7% to 4.7%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 118% to 143% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While American Electric Power Company has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research American Electric Power Company to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AEP’s future growth? Take a look at our free research report of analyst consensus for AEP’s outlook.
- Financial Health: Are AEP’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 March 2019. 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.