After looking at The York Water Company’s (NASDAQ:YORW) latest earnings announcement (31 March 2018), 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 York Water’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for York Water
Commentary On YORW’s Past Performance
YORW’s trailing twelve-month earnings (from 31 March 2018) of US$12.99m has increased by 8.76% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.37%, indicating the rate at which YORW is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is merely due to industry tailwinds, or if York Water has seen some company-specific growth.
In the past few years, York Water grew its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Scanning growth from a sector-level, the US water utilities industry has been growing, albeit, at a muted single-digit rate of 8.52% over the previous year, and 7.13% over the past five. This suggests that any uplift the industry is deriving benefit from, York Water is able to leverage this to its advantage.
In terms of returns from investment, York Water has not invested its equity funds well, leading to a 10.78% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 5.52% exceeds the US Water Utilities industry of 4.30%, indicating York Water has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for York Water’s debt level, has increased over the past 3 years from 5.51% to 5.59%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 86.93% to 76.31% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While York Water has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research York Water to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for YORW’s future growth? Take a look at our free research report of analyst consensus for YORW’s outlook.
- Financial Health: Is YORW’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 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.