When Medtronic plc's (NYSE:MDT) announced its latest earnings (26 July 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Medtronic's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not MDT actually performed well. Below is a quick commentary on how I see MDT has performed.
How Did MDT's Recent Performance Stack Up Against Its Past?
MDT's trailing twelve-month earnings (from 26 July 2019) of US$4.4b has jumped 40% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.3%, indicating the rate at which MDT is growing has accelerated. What's the driver of this growth? Let's take a look at if it is solely attributable to industry tailwinds, or if Medtronic has experienced some company-specific growth.
In terms of returns from investment, Medtronic has fallen short of achieving a 20% return on equity (ROE), recording 8.8% instead. Furthermore, its return on assets (ROA) of 6.5% is below the US Medical Equipment industry of 6.8%, indicating Medtronic's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Medtronic’s debt level, has increased over the past 3 years from 6.5% to 8.2%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 66% to 52% over the past 5 years.
What does this mean?
Medtronic's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as Medtronic gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Medtronic to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MDT’s future growth? Take a look at our free research report of analyst consensus for MDT’s outlook.
- Financial Health: Are MDT’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 26 July 2019. This may not be consistent with full year annual report figures.
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