After looking at Franklin Electric Co., Inc.’s (NASDAQ:FELE) latest earnings announcement (30 September 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 Franklin Electric’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
How Well Did FELE Perform?
FELE’s trailing twelve-month earnings (from 30 September 2018) of US$89m has increased by 2.4% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 2.4%, indicating the rate at which FELE is growing has slowed down. To understand what’s happening, let’s look at what’s going on with margins and if the entire industry is experiencing the hit as well.
In terms of returns from investment, Franklin Electric has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 8.2% exceeds the US Machinery industry of 6.6%, indicating Franklin Electric has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Franklin Electric’s debt level, has increased over the past 3 years from 10% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 33% to 29% 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 Franklin Electric gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Franklin Electric to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FELE’s future growth? Take a look at our free research report of analyst consensus for FELE’s outlook.
- Financial Health: Are FELE’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 September 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at email@example.com.