Baxter International Inc (NYSE:BAX): Has Recent Earnings Growth Beaten Long-Term Trend?
Today I will examine Baxter International Inc’s (NYSE:BAX) latest earnings update (30 September 2018) and compare these figures against its performance over the past couple of years, in addition to how the rest of BAX’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.
Check out our latest analysis for Baxter International
Commentary On BAX’s Past Performance
BAX’s trailing twelve-month earnings (from 30 September 2018) of US$1.2b has jumped 19% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.4%, indicating the rate at which BAX is growing has accelerated. What’s enabled this growth? Let’s see whether it is only a result of an industry uplift, or if Baxter International has seen some company-specific growth.
In terms of returns from investment, Baxter International has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 7.5% exceeds the US Medical Equipment industry of 6.9%, indicating Baxter International has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Baxter International’s debt level, has increased over the past 3 years from 5.0% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 117% to 38% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There could be factors that are affecting the entire industry thus the high industry growth rate over the same period of time. I suggest you continue to research Baxter International to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BAX’s future growth? Take a look at our free research report of analyst consensus for BAX’s outlook.
Financial Health: Are BAX’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 30 September 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
