For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on NextEra Energy, Inc. (NYSE:NEE) useful as an attempt to give more color around how NextEra Energy is currently performing.
Commentary On NEE's Past Performance
NEE's trailing twelve-month earnings (from 31 March 2020) of US$3.5b has jumped 21% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 11%, indicating the rate at which NEE is growing has accelerated. How has it been able to do this? Let's take a look at if it is merely because of an industry uplift, or if NextEra Energy has seen some company-specific growth.
In terms of returns from investment, NextEra Energy has fallen short of achieving a 20% return on equity (ROE), recording 7.5% instead. However, its return on assets (ROA) of 5.2% exceeds the US Electric Utilities industry of 4.0%, indicating NextEra Energy has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for NextEra Energy’s debt level, has increased over the past 3 years from 5.4% to 5.7%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 145% to 115% over the past 5 years.
What does this mean?
Though NextEra Energy's past data is helpful, it is only one aspect of my investment thesis. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. You should continue to research NextEra Energy to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NEE’s future growth? Take a look at our free research report of analyst consensus for NEE’s outlook.
- Financial Health: Are NEE’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 31 March 2020. This may not be consistent with full year annual report figures.
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.
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