Investors with a long-term horizong may find it valuable to assess Quanex Building Products Corporation’s (NYSE:NX) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Quanex Building Products is currently performing.
How NX fared against its long-term earnings performance and its industry
NX’s trailing twelve-month earnings (from 31 October 2018) of US$26m has jumped 41% 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 51%, indicating the rate at which NX is growing has slowed down. To understand what’s happening, let’s examine what’s occurring with margins and whether the whole industry is feeling the heat.
In terms of returns from investment, Quanex Building Products has fallen short of achieving a 20% return on equity (ROE), recording 6.7% instead. Furthermore, its return on assets (ROA) of 5.0% is below the US Building industry of 8.7%, indicating Quanex Building Products’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Quanex Building Products’s debt level, has increased over the past 3 years from 5.2% to 5.9%.
What does this mean?
Though Quanex Building Products’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Quanex Building Products to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for NX’s future growth? Take a look at our free research report of analyst consensus for NX’s outlook.
- Financial Health: Are NX’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 October 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 email@example.com.