Should Brown & Brown, Inc.'s (NYSE:BRO) Recent Earnings Decline Worry You?
For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Brown & Brown, Inc. (NYSE:BRO) useful as an attempt to give more color around how Brown & Brown is currently performing.
See our latest analysis for Brown & Brown
Was BRO's recent earnings decline indicative of a tough track record?
BRO's trailing twelve-month earnings (from 30 June 2019) of US$386m has declined by -9.9% 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 16%, indicating the rate at which BRO is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Brown & Brown has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 6.1% exceeds the US Insurance industry of 2.5%, indicating Brown & Brown has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Brown & Brown’s debt level, has increased over the past 3 years from 12% to 13%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 56% to 47% over the past 5 years.
What does this mean?
Though Brown & Brown's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. You should continue to research Brown & Brown to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for BRO’s future growth? Take a look at our free research report of analyst consensus for BRO’s outlook.
Financial Health: Are BRO’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 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.
