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Has Brady Corporation (NYSE:BRC) Improved Earnings Growth In Recent Times?

Simply Wall St

Assessing Brady Corporation's (NYSE:BRC) performance as a company requires looking at more than just a years' earnings data. Below, I will run you through a simple sense check to build perspective on how Brady is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its commercial services industry peers.

See our latest analysis for Brady

Were BRC's earnings stronger than its past performances and the industry?

BRC's trailing twelve-month earnings (from 31 July 2019) of US$130m has jumped 45% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 52%, indicating the rate at which BRC is growing has slowed down. To understand what's happening, let's examine what's occurring with margins and whether the whole industry is facing the same headwind.

NYSE:BRC Income Statement, November 2nd 2019
NYSE:BRC Income Statement, November 2nd 2019

In terms of returns from investment, Brady has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 11% exceeds the US Commercial Services industry of 6.5%, indicating Brady has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Brady’s debt level, has increased over the past 3 years from 13% to 18%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 36% to 5.9% over the past 5 years.

What does this mean?

Though Brady's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Brady to get a better picture of the stock by looking at:

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

  2. Financial Health: Are BRC’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 July 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.