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After reading WestRock Company's (NYSE:WRK) most recent earnings announcement (31 December 2019), 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 WestRock's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Did WRK perform worse than its track record and industry?
WRK's trailing twelve-month earnings (from 31 December 2019) of US$862m has declined by -5.3% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 24%, indicating the rate at which WRK is growing has slowed down. Why is this? Well, let's look at what's going on with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, WestRock has fallen short of achieving a 20% return on equity (ROE), recording 7.3% instead. Furthermore, its return on assets (ROA) of 4.2% is below the US Packaging industry of 5.4%, indicating WestRock's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for WestRock’s debt level, has declined over the past 3 years from 5.4% to 5.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 64% to 84% over the past 5 years.
What does this mean?
Though WestRock's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I suggest you continue to research WestRock to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for WRK’s future growth? Take a look at our free research report of analyst consensus for WRK’s outlook.
Financial Health: Are WRK’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 December 2019. This may not be consistent with full year annual report figures.
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.
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