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BorgWarner Inc. (NYSE:BWA): Has Recent Earnings Growth Beaten Long-Term Trend?

Simply Wall St

Assessing BorgWarner Inc.'s (NYSE:BWA) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess BWA's latest performance announced on 30 June 2019 and evaluate these figures to its historical trend and industry movements.

View our latest analysis for BorgWarner

How BWA fared against its long-term earnings performance and its industry

BWA's trailing twelve-month earnings (from 30 June 2019) of US$766m has jumped 43% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.1%, indicating the rate at which BWA is growing has accelerated. How has it been able to do this? Let's see if it is merely attributable to industry tailwinds, or if BorgWarner has experienced some company-specific growth.

NYSE:BWA Income Statement, September 9th 2019

In terms of returns from investment, BorgWarner has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 8.0% exceeds the US Auto Components industry of 7.2%, indicating BorgWarner has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for BorgWarner’s debt level, has declined over the past 3 years from 17% to 15%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 32% to 47% over the past 5 years.

What does this mean?

BorgWarner's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as BorgWarner gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research BorgWarner to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BWA’s future growth? Take a look at our free research report of analyst consensus for BWA’s outlook.
  2. Financial Health: Are BWA’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 30 June 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.