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Does Loews Corporation's (NYSE:L) 47% Earnings Growth Reflect The Long-Term Trend?

Simply Wall St

After looking at Loews Corporation's (NYSE:L) latest earnings announcement (31 December 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Loews's performance has been impacted by industry movements. In this article I briefly touch on my key findings.

See our latest analysis for Loews

Commentary On L's Past Performance

L's trailing twelve-month earnings (from 31 December 2019) of US$932m has jumped 47% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.9%, indicating the rate at which L is growing has accelerated. How has it been able to do this? Let's see if it is merely because of an industry uplift, or if Loews has seen some company-specific growth.

NYSE:L Income Statement, February 17th 2020

In terms of returns from investment, Loews has fallen short of achieving a 20% return on equity (ROE), recording 4.0% instead. Furthermore, its return on assets (ROA) of 1.9% is below the US Insurance industry of 2.7%, indicating Loews's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Loews’s debt level, has declined over the past 3 years from 4.3% to 3.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 43% to 53% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. While Loews has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Loews to get a more holistic view of the stock by looking at:

  1. Financial Health: Are L’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.
  2. Valuation: What is L 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 L is currently mispriced by the market.
  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 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 editorial-team@simplywallst.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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.