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When Cooper Tire & Rubber Company (NYSE:CTB) released its most recent earnings update (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Cooper Tire & Rubber's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not CTB actually performed well. Below is a quick commentary on how I see CTB has performed.
Commentary On CTB's Past Performance
CTB's trailing twelve-month earnings (from 31 December 2018) of US$77m has declined by -20% 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 -8.8%, indicating the rate at which CTB is growing has slowed down. What could be happening here? Let's examine what's occurring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Cooper Tire & Rubber has fallen short of achieving a 20% return on equity (ROE), recording 6.5% instead. Furthermore, its return on assets (ROA) of 3.7% is below the US Auto Components industry of 7.2%, indicating Cooper Tire & Rubber's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Cooper Tire & Rubber’s debt level, has declined over the past 3 years from 22% to 10%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Typically companies that face a prolonged period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry growth and disruption. I suggest you continue to research Cooper Tire & Rubber to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CTB’s future growth? Take a look at our free research report of analyst consensus for CTB’s outlook.
- Financial Health: Are CTB’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 December 2018. 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.