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Erie Indemnity Company’s (NASDAQ:ERIE) Earnings Grew 46%, Did It Beat Long-Term Trend?

Simply Wall St

Assessing Erie Indemnity Company’s (NASDAQ:ERIE) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess ERIE’s latest performance announced on 31 December 2018 and evaluate these figures to its historical trend and industry movements.

View our latest analysis for Erie Indemnity

Did ERIE beat its long-term earnings growth trend and its industry?

ERIE’s trailing twelve-month earnings (from 31 December 2018) of US$288m has jumped 46% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.4%, indicating the rate at which ERIE is growing has accelerated. What’s the driver of this growth? Let’s take a look at whether it is solely owing to an industry uplift, or if Erie Indemnity has seen some company-specific growth.

NasdaqGS:ERIE Income Statement, March 6th 2019

In terms of returns from investment, Erie Indemnity has invested its equity funds well leading to a 30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15% exceeds the US Insurance industry of 2.2%, indicating Erie Indemnity has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Erie Indemnity’s debt level, has increased over the past 3 years from 24% to 28%.

What does this mean?

Though Erie Indemnity’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Erie Indemnity to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for ERIE’s future growth? Take a look at our free research report of analyst consensus for ERIE’s outlook.
  2. Financial Health: Are ERIE’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.
  3. 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 2018. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Thank you for reading.