Aptiv PLC (NYSE:APTV): Should The Recent Earnings Drop Worry You?
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For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Aptiv PLC (NYSE:APTV) useful as an attempt to give more color around how Aptiv is currently performing.
See our latest analysis for Aptiv
Was APTV's recent earnings decline worse than the long-term trend and the industry?
APTV's trailing twelve-month earnings (from 31 March 2019) of US$1.0b has declined by -7.8% 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 -6.6%, indicating the rate at which APTV is growing has slowed down. Why is this? Let's examine what's occurring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Aptiv has invested its equity funds well leading to a 28% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.6% exceeds the US Auto Components industry of 7.2%, indicating Aptiv has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Aptiv’s debt level, has declined over the past 3 years from 25% to 17%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 70% to 125% over the past 5 years.
What does this mean?
Aptiv's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Typically companies that endure a drawn out period of reduction in earnings are going through some sort of reinvestment phase Though if the whole industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Aptiv and its peers a riskier investment. I recommend you continue to research Aptiv to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for APTV’s future growth? Take a look at our free research report of analyst consensus for APTV’s outlook.
Financial Health: Are APTV’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 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.
