For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Kewaunee Scientific Corporation (NASDAQ:KEQU) useful as an attempt to give more color around how Kewaunee Scientific is currently performing.
How Did KEQU’s Recent Performance Stack Up Against Its Past?
KEQU’s trailing twelve-month earnings (from 30 April 2018) of US$5.19m has jumped 14.91% 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 16.08%, indicating the rate at which KEQU is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the entire industry is facing the same headwind.
In the past few years, revenue growth has been lagging behind which suggests that Kewaunee Scientific’s bottom line has been propelled by unmaintainable cost-reductions. Viewing growth from a sector-level, the US medical equipment industry has been growing, albeit, at a subdued single-digit rate of 9.72% over the prior twelve months, and 9.43% over the last five years. This growth is a median of profitable companies of 25 Medical Equipment companies in US including Arjo, WNDM Medical and Nanosonics. This shows that any tailwind the industry is deriving benefit from, Kewaunee Scientific is capable of leveraging this to its advantage.
In terms of returns from investment, Kewaunee Scientific has fallen short of achieving a 20% return on equity (ROE), recording 11.29% instead. Furthermore, its return on assets (ROA) of 6.50% is below the US Medical Equipment industry of 7.68%, indicating Kewaunee Scientific’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Kewaunee Scientific’s debt level, has increased over the past 3 years from 11.11% to 16.69%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 31.07% to 13.29% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Kewaunee Scientific to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for KEQU’s future growth? Take a look at our free research report of analyst consensus for KEQU’s outlook.
- Financial Health: Are KEQU’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 April 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 firstname.lastname@example.org.