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When American States Water Company (NYSE:AWR) released its most recent earnings update (31 March 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were American States Water's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not AWR actually performed well. Below is a quick commentary on how I see AWR has performed.
Despite a decline, did AWR underperform the long-term trend and the industry?
AWR's trailing twelve-month earnings (from 31 March 2019) of US$66m has declined by -2.2% 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 2.1%, indicating the rate at which AWR is growing has slowed down. Why is this? Let's examine what's occurring with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, American States Water has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 5.6% exceeds the US Water Utilities industry of 3.9%, indicating American States Water has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for American States Water’s debt level, has declined over the past 3 years from 9.3% to 7.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 72% to 77% over the past 5 years.
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 are profitable, but have capricious earnings, can have many factors influencing its business. I recommend you 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: Are 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 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 email@example.com. 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.