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Does NorthWestern Corporation's (NYSE:NWE) 28% Earnings Growth Make It An Outperformer?

Simply Wall St

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Understanding NorthWestern Corporation's (NYSE:NWE) 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 NorthWestern is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period.

See our latest analysis for NorthWestern

Did NWE's recent earnings growth beat the long-term trend and the industry?

NWE's trailing twelve-month earnings (from 31 March 2019) of US$211m has jumped 28% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 12%, indicating the rate at which NWE is growing has accelerated. How has it been able to do this? Let's take a look at if it is merely attributable to industry tailwinds, or if NorthWestern has experienced some company-specific growth.

NYSE:NWE Income Statement, May 3rd 2019

In terms of returns from investment, NorthWestern has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 5.3% exceeds the US Integrated Utilities industry of 4.6%, indicating NorthWestern has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for NorthWestern’s debt level, has increased over the past 3 years from 4.7% to 5.2%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 118% to 106% over the past 5 years.

What does this mean?

NorthWestern's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as NorthWestern gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research NorthWestern to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for NWE’s future growth? Take a look at our free research report of analyst consensus for NWE’s outlook.
  2. Financial Health: Are NWE’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.
  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 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 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. Thank you for reading.