For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on RGC Resources, Inc. (NASDAQ:RGCO) useful as an attempt to give more color around how RGC Resources is currently performing.
How RGCO fared against its long-term earnings performance and its industry
RGCO's trailing twelve-month earnings (from 31 March 2019) of US$8.9m has jumped 41% 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 RGCO is growing has accelerated. What's enabled this growth? Let's see if it is merely a result of an industry uplift, or if RGC Resources has seen some company-specific growth.
In terms of returns from investment, RGC Resources has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 5.0% exceeds the US Gas Utilities industry of 4.5%, indicating RGC Resources has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for RGC Resources’s debt level, has declined over the past 3 years from 8.1% to 5.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 56% to 102% over the past 5 years.
What does this mean?
Though RGC Resources's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as RGC Resources gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research RGC Resources to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RGCO’s future growth? Take a look at our free research report of analyst consensus for RGCO’s outlook.
- Financial Health: Are RGCO’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.