Did Ingersoll-Rand Plc’s (NYSE:IR) Recent Earnings Growth Beat The Trend?
For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Ingersoll-Rand Plc’s (NYSE:IR) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
See our latest analysis for Ingersoll-Rand
How Well Did IR Perform?
IR’s trailing twelve-month earnings (from 30 June 2018) of US$1.44b has jumped 38.6% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 15.7%, indicating the rate at which IR is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is merely due to industry tailwinds, or if Ingersoll-Rand has seen some company-specific growth.
In the past few years, Ingersoll-Rand grew its bottom line faster than revenue by effectively controlling its costs. This has led to a margin expansion and profitability over time. Inspecting growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 23.2% in the previous year, and a less exciting 5.6% over the past five years. This growth is a median of profitable companies of 25 Machinery companies in US including COSCO Shipping International (Singapore), IHI and Omni-Lite Industries Canada. This means that any uplift the industry is gaining from, Ingersoll-Rand is able to amplify this to its advantage.
In terms of returns from investment, Ingersoll-Rand has invested its equity funds well leading to a 21.2% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.0% exceeds the US Machinery industry of 6.2%, indicating Ingersoll-Rand has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Ingersoll-Rand’s debt level, has increased over the past 3 years from 9.2% to 11.7%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 66.4% to 63.6% over the past 5 years.
What does this mean?
Though Ingersoll-Rand’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Ingersoll-Rand to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for IR’s future growth? Take a look at our free research report of analyst consensus for IR’s outlook.
Financial Health: Are IR’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 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
