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After reading Northwest Natural Holding Company's (NYSE:NWN) most recent earnings announcement (31 March 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Despite a decline, did NWN underperform the long-term trend and the industry?
NWN's trailing twelve-month earnings (from 31 March 2019) of US$69m has declined by -5.5% 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 -11%, indicating the rate at which NWN is growing has slowed down. What could be happening here? Let's examine what's transpiring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, Northwest Natural Holding has fallen short of achieving a 20% return on equity (ROE), recording 8.7% instead. Furthermore, its return on assets (ROA) of 3.3% is below the US Gas Utilities industry of 4.5%, indicating Northwest Natural Holding's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Northwest Natural Holding’s debt level, has declined over the past 3 years from 5.5% to 4.9%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 99% to 115% 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 capricious earnings, can have many factors influencing its business. You should continue to research Northwest Natural Holding to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NWN’s future growth? Take a look at our free research report of analyst consensus for NWN’s outlook.
- Financial Health: Are NWN’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 2019. This may not be consistent with full year annual report figures.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.