Does Southwest Gas Holdings Inc’s (NYSE:SWX) Past Performance Indicate A Stronger Future?
After reading Southwest Gas Holdings Inc’s (NYSE:SWX) most recent earnings announcement (30 June 2018), 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 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 Southwest Gas Holdings’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
View our latest analysis for Southwest Gas Holdings
Did SWX’s recent earnings growth beat the long-term trend and the industry?
SWX’s trailing twelve-month earnings (from 30 June 2018) of US$207m has jumped 34% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.4%, indicating the rate at which SWX is growing has accelerated. What’s enabled this growth? Let’s take a look at if it is only due to an industry uplift, or if Southwest Gas Holdings has seen some company-specific growth.
In terms of returns from investment, Southwest Gas Holdings has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.5% is below the US Gas Utilities industry of 5.2%, indicating Southwest Gas Holdings’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Southwest Gas Holdings’s debt level, has declined over the past 3 years from 4.8% to 4.5%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 92% to 108% over the past 5 years.
What does this mean?
Southwest Gas Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Southwest Gas Holdings to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for SWX’s future growth? Take a look at our free research report of analyst consensus for SWX’s outlook.
Financial Health: Are SWX’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 30 June 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 editorial-team@simplywallst.com.
