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Should Applied Industrial Technologies, Inc.'s (NYSE:AIT) Recent Earnings Worry You?

Simply Wall St

After reading Applied Industrial Technologies, Inc.'s (NYSE:AIT) most recent earnings announcement (30 June 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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 Applied Industrial Technologies's performance has been impacted by industry movements. In this article I briefly touch on my key findings.

See our latest analysis for Applied Industrial Technologies

Did AIT's recent earnings growth beat the long-term trend and the industry?

AIT's trailing twelve-month earnings (from 30 June 2019) of US$144m has increased by 1.7% 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 11%, indicating the rate at which AIT is growing has slowed down. What could be happening here? Well, let's examine what's occurring with margins and whether the rest of the industry is facing the same headwind.

NYSE:AIT Income Statement, September 10th 2019
NYSE:AIT Income Statement, September 10th 2019

In terms of returns from investment, Applied Industrial Technologies has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 7.9% exceeds the US Trade Distributors industry of 5.6%, indicating Applied Industrial Technologies has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Applied Industrial Technologies’s debt level, has declined over the past 3 years from 16% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 22% to 107% over the past 5 years.

What does this mean?

Applied Industrial Technologies'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 Applied Industrial Technologies gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Applied Industrial Technologies to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AIT’s future growth? Take a look at our free research report of analyst consensus for AIT’s outlook.

  2. Financial Health: Are AIT’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.

  3. 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 30 June 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 editorial-team@simplywallst.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.