Assessing Columbus McKinnon Corporation’s (NASDAQ:CMCO) 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 Columbus McKinnon is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its machinery industry peers. See our latest analysis for Columbus McKinnon
How Did CMCO’s Recent Performance Stack Up Against Its Past?
CMCO’s trailing twelve-month earnings (from 31 March 2018) of US$22.07m has more than doubled from US$8.98m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -3.40%, indicating the rate at which CMCO is growing has accelerated. How has it been able to do this? Let’s take a look at if it is merely attributable to an industry uplift, or if Columbus McKinnon has seen some company-specific growth.
Over the past couple of years, Columbus McKinnon top-line expansion has outpaced earnings and the growth rate of expenses. Though this resulted in a margin contraction, it has softened Columbus McKinnon’s earnings contraction. Eyeballing growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 23.44% in the previous year, and a more muted 4.62% over the past half a decade. This suggests that any tailwind the industry is benefiting from, Columbus McKinnon is capable of leveraging this to its advantage.
In terms of returns from investment, Columbus McKinnon has not invested its equity funds well, leading to a 5.41% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.65% is below the US Machinery industry of 5.76%, indicating Columbus McKinnon’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Columbus McKinnon’s debt level, has declined over the past 3 years from 9.50% to 6.21%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 63.35% to 98.36% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be factors that are affecting the industry as a whole, thus the high industry growth rate over the same time frame. I recommend you continue to research Columbus McKinnon to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CMCO’s future growth? Take a look at our free research report of analyst consensus for CMCO’s outlook.
- Financial Health: Is CMCO’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 31 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.