Understanding Innospec Inc.'s (NASDAQ:IOSP) 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 Innospec is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period.
How Well Did IOSP Perform?
IOSP's trailing twelve-month earnings (from 31 December 2018) of US$85m has jumped 38% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -4.6%, indicating the rate at which IOSP is growing has accelerated. What's the driver of this growth? Let's see whether it is solely attributable to an industry uplift, or if Innospec has experienced some company-specific growth.
In terms of returns from investment, Innospec has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. Furthermore, its return on assets (ROA) of 6.2% is below the US Chemicals industry of 7.7%, indicating Innospec's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Innospec’s debt level, has declined over the past 3 years from 15% to 13%.
What does this mean?
Though Innospec'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 Innospec to get a more holistic view of the stock by looking at:
- Financial Health: Are IOSP’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.
- Valuation: What is IOSP worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether IOSP is currently mispriced by the market.
- 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.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.