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Does AmerisourceBergen Corporation’s (NYSE:ABC) Past Performance Indicate A Stronger Future?

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Assessing AmerisourceBergen Corporation’s (NYSE:ABC) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess ABC’s recent performance announced on 31 December 2018 and evaluate these figures to its long-term trend and industry movements.

Check out our latest analysis for AmerisourceBergen

Did ABC beat its long-term earnings growth trend and its industry?

ABC’s trailing twelve-month earnings (from 31 December 2018) of US$1.2b has jumped 22% 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 34%, indicating the rate at which ABC is growing has slowed down. To understand what’s happening, let’s examine what’s transpiring with margins and if the entire industry is facing the same headwind.

NYSE:ABC Income Statement Export February 4th 19
NYSE:ABC Income Statement Export February 4th 19

In terms of returns from investment, AmerisourceBergen has invested its equity funds well leading to a 36% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 3.5% is below the US Healthcare industry of 6.3%, indicating AmerisourceBergen’s are utilized less efficiently. Furthermore, its return on capital (ROC), which also accounts for AmerisourceBergen’s debt level, has declined over the past 3 years from 20% to 16%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 81% to 148% over the past 5 years.

What does this mean?

AmerisourceBergen’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 AmerisourceBergen gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research AmerisourceBergen to get a more holistic view of the stock by looking at:

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

  2. Financial Health: Are ABC’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 December 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.

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