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Should You Be Concerned With Universal Display Corporation's (NASDAQ:OLED) -15% Earnings Drop?

Simply Wall St

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Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Universal Display Corporation's (NASDAQ:OLED) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.

See our latest analysis for Universal Display

Was OLED weak performance lately part of a long-term decline?

OLED's trailing twelve-month earnings (from 31 March 2019) of US$83m has declined by -15% 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 11%, indicating the rate at which OLED is growing has slowed down. What could be happening here? Well, let's look at what's transpiring with margins and whether the whole industry is facing the same headwind.

NasdaqGS:OLED Income Statement, May 30th 2019

In terms of returns from investment, Universal Display has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 7.7% is below the US Semiconductor industry of 8.1%, indicating Universal Display's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Universal Display’s debt level, has increased over the past 3 years from 6.2% to 10%.

What does this mean?

Though Universal Display's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. You should continue to research Universal Display to get a better picture of the stock by looking at:

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