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After looking at Sensient Technologies Corporation's (NYSE:SXT) latest earnings announcement (31 March 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Sensient Technologies's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Did SXT's recent earnings growth beat the long-term trend and the industry?
SXT's trailing twelve-month earnings (from 31 March 2019) of US$152m has jumped 33% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.4%, indicating the rate at which SXT is growing has accelerated. What's the driver of this growth? Let's see if it is solely owing to industry tailwinds, or if Sensient Technologies has experienced some company-specific growth.
In terms of returns from investment, Sensient Technologies has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 9.4% exceeds the US Chemicals industry of 7.1%, indicating Sensient Technologies has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Sensient Technologies’s debt level, has declined over the past 3 years from 14% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 33% to 81% over the past 5 years.
What does this mean?
Though Sensient Technologies'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? You should continue to research Sensient Technologies to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SXT’s future growth? Take a look at our free research report of analyst consensus for SXT’s outlook.
- Financial Health: Are SXT’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 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. Thank you for reading.