After looking at EMCOR Group, Inc.'s (NYSE:EME) latest earnings announcement (30 June 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 tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
How Well Did EME Perform?
EME's trailing twelve-month earnings (from 30 June 2019) of US$316m has jumped 29% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 13%, indicating the rate at which EME is growing has accelerated. What's enabled this growth? Let's see whether it is solely because of an industry uplift, or if EMCOR Group has seen some company-specific growth.
In terms of returns from investment, EMCOR Group has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 7.4% exceeds the US Construction industry of 5.5%, indicating EMCOR Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for EMCOR Group’s debt level, has increased over the past 3 years from 13% to 17%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 22% to 15% over the past 5 years.
What does this mean?
While past data is useful, it 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? You should continue to research EMCOR Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EME’s future growth? Take a look at our free research report of analyst consensus for EME’s outlook.
- Financial Health: Are EME’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 2019. This may not be consistent with full year annual report figures.
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