In this article, I will take a look at California Water Service Group's (NYSE:CWT) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of CWT'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.
Commentary On CWT's Past Performance
CWT's trailing twelve-month earnings (from 30 June 2019) of US$61m has declined by -9.5% 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 6.6%, indicating the rate at which CWT is growing has slowed down. Why could this be happening? Let's examine what's transpiring with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, California Water Service Group has fallen short of achieving a 20% return on equity (ROE), recording 8.4% instead. Furthermore, its return on assets (ROA) of 3.5% is below the US Water Utilities industry of 3.6%, indicating California Water Service Group's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for California Water Service Group’s debt level, has declined over the past 3 years from 4.5% to 4.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 86% to 134% over the past 5 years.
What does this mean?
California Water Service Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I recommend you continue to research California Water Service Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CWT’s future growth? Take a look at our free research report of analyst consensus for CWT’s outlook.
- Financial Health: Are CWT’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 email@example.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.