Today I will examine ATCO Ltd.'s (TSX:ACO.X) latest earnings update (31 March 2020) and compare these figures against its performance over the past couple of years, in addition to how the rest of ACO.X's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Were ACO.X's earnings stronger than its past performances and the industry?
ACO.X's trailing twelve-month earnings (from 31 March 2020) of CA$488m has jumped 39% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 14%, indicating the rate at which ACO.X is growing has accelerated. How has it been able to do this? Let's take a look at if it is solely attributable to industry tailwinds, or if ATCO has seen some company-specific growth.
In terms of returns from investment, ATCO has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 4.3% exceeds the CA Integrated Utilities industry of 4.3%, indicating ATCO has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for ATCO’s debt level, has declined over the past 3 years from 6.8% to 5.9%.
What does this mean?
ATCO's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research ATCO to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ACO.X’s future growth? Take a look at our free research report of analyst consensus for ACO.X’s outlook.
- Financial Health: Are ACO.X’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 2020. This may not be consistent with full year annual report figures.
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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.