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Black Hills Corporation (NYSE:BKH): Does The Earnings Decline Make It An Underperformer?

Simply Wall St

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For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Black Hills Corporation's (NYSE:BKH) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.

See our latest analysis for Black Hills

Was BKH's recent earnings decline worse than the long-term trend and the industry?

BKH's trailing twelve-month earnings (from 31 March 2019) of US$234m has declined by -7.0% 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 26%, indicating the rate at which BKH is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and if the whole industry is facing the same headwind.

NYSE:BKH Income Statement, June 14th 2019

In terms of returns from investment, Black Hills has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 5.3% exceeds the US Integrated Utilities industry of 4.5%, indicating Black Hills has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Black Hills’s debt level, has increased over the past 3 years from 4.9% to 6.3%.

What does this mean?

Though Black Hills's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I recommend you continue to research Black Hills to get a better picture of the stock by looking at:

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