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After looking at Analog Devices, Inc.'s (NASDAQ:ADI) latest earnings announcement (04 May 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Analog Devices's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Could ADI beat the long-term trend and outperform its industry?
ADI's trailing twelve-month earnings (from 04 May 2019) of US$1.5b has jumped 38% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 18%, indicating the rate at which ADI is growing has accelerated. How has it been able to do this? Let's take a look at whether it is only attributable to industry tailwinds, or if Analog Devices has seen some company-specific growth.
In terms of returns from investment, Analog Devices has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 8.0% is below the US Semiconductor industry of 8.0%, indicating Analog Devices's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Analog Devices’s debt level, has declined over the past 3 years from 15% to 9.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 19% to 51% over the past 5 years.
What does this mean?
Analog Devices's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Analog Devices has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Analog Devices to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ADI’s future growth? Take a look at our free research report of analyst consensus for ADI’s outlook.
- Financial Health: Are ADI’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 04 May 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.