American States Water Company (NYSE:AWR): Has Recent Earnings Growth Beaten Long-Term Trend?
When American States Water Company (NYSE:AWR) released its most recent earnings update (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how American States Water performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see AWR has performed. View our latest analysis for American States Water
How AWR fared against its long-term earnings performance and its industry
I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to examine many different companies on a similar basis, using the latest information. For American States Water, its most recent bottom-line (trailing twelve month) is US$68.99M, which, in comparison to the prior year’s figure, has risen by 16.13%. Given that these values may be fairly short-term thinking, I’ve computed an annualized five-year figure for AWR’s net income, which stands at US$57.05M This suggests that, generally, American States Water has been able to consistently improve its profits over the last few years as well.
What’s the driver of this growth? Well, let’s take a look at if it is merely because of industry tailwinds, or if American States Water has experienced some company-specific growth. In the last couple of years, American States Water grew its bottom line faster than revenue by successfully controlling its costs. This brought about a margin expansion and profitability over time. Viewing growth from a sector-level, the US water utilities industry has been growing, albeit, at a unexciting single-digit rate of 8.20% over the past year, and 7.13% over the past five. This means whatever tailwind the industry is deriving benefit from, American States Water is capable of leveraging this to its advantage.
What does this mean?
American States Water’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as American States Water gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research American States Water to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for AWR’s future growth? Take a look at our free research report of analyst consensus for AWR’s outlook.
Financial Health: Is AWR’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 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
