Understanding AAR Corp.'s (NYSE:AIR) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how AAR is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period.
Could AIR beat the long-term trend and outperform its industry?
AIR's trailing twelve-month earnings (from 30 November 2019) of US$91m has jumped 15% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 39%, indicating the rate at which AIR is growing has slowed down. To understand what's happening, let’s take a look at what’s transpiring with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, AAR has fallen short of achieving a 20% return on equity (ROE), recording 9.9% instead. Furthermore, its return on assets (ROA) of 5.6% is below the US Aerospace & Defense industry of 6.7%, indicating AAR's are utilized less efficiently. However, its return on capital (ROC), which also accounts for AAR’s debt level, has increased over the past 3 years from 6.2% to 9.3%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 64% to 21% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While AAR has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research AAR to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AIR’s future growth? Take a look at our free research report of analyst consensus for AIR’s outlook.
- Financial Health: Are AIR’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 November 2019. This may not be consistent with full year annual report figures.
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.
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