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In this commentary, I will examine Applied Industrial Technologies, Inc.’s (NYSE:AIT) latest earnings update (31 December 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the trade distributors industry performed. As an investor, I find it beneficial to assess AIT’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did AIT’s recent earnings growth beat the long-term trend and the industry?
AIT’s trailing twelve-month earnings (from 31 December 2018) of US$165m has jumped 12% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.5%, indicating the rate at which AIT is growing has accelerated. How has it been able to do this? Let’s see whether it is solely due to an industry uplift, or if Applied Industrial Technologies has seen some company-specific growth.
In terms of returns from investment, Applied Industrial Technologies has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 8.9% exceeds the US Trade Distributors industry of 6.2%, 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 15% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 2.0% to 109% over the past 5 years.
What does this mean?
Though Applied Industrial Technologies’s past data is helpful, it is only one aspect of my investment thesis. While Applied Industrial Technologies has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Applied Industrial Technologies to get a better picture of the stock by looking at:
- 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.
- 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.
- 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 2018. 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.