Understanding California Water Service Group’s (NYSE:CWT) 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 California Water Service Group is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period.
Was CWT weak performance lately part of a long-term decline?
CWT’s trailing twelve-month earnings (from 30 September 2018) of US$59m has declined by -15% 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 5.4%, indicating the rate at which CWT is growing has slowed down. Why could this be happening? Well, let’s look at what’s occurring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, California Water Service Group has fallen short of achieving a 20% return on equity (ROE), recording 8.2% instead. Furthermore, its return on assets (ROA) of 3.4% is below the US Water Utilities industry of 4.2%, indicating California Water Service Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for California Water Service Group’s debt level, has declined over the past 3 years from 4.9% to 4.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 82% to 126% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. I recommend you continue to research California Water Service Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CWT’s future growth? Take a look at our free research report of analyst consensus for CWT’s outlook.
- Financial Health: Are CWT’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 September 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 email@example.com.