When Tractor Supply Company (NasdaqGS:TSCO) announced its most recent earnings (29 June 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Tractor Supply has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see TSCO has performed.
Did TSCO beat its long-term earnings growth trend and its industry?
TSCO's trailing twelve-month earnings (from 29 June 2019) of US$550m has jumped 15% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.9%, indicating the rate at which TSCO is growing has accelerated. How has it been able to do this? Let's take a look at if it is merely due to an industry uplift, or if Tractor Supply has seen some company-specific growth.
In terms of returns from investment, Tractor Supply has invested its equity funds well leading to a 36% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the US Specialty Retail industry of 5.6%, indicating Tractor Supply has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Tractor Supply’s debt level, has declined over the past 3 years from 36% to 18%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.3% to 32% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Tractor Supply gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Tractor Supply to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TSCO’s future growth? Take a look at our free research report of analyst consensus for TSCO’s outlook.
- Financial Health: Are TSCO’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 29 June 2019. This may not be consistent with full year annual report figures.
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