For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at AAR Corp.'s (NYSE:AIR) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Did AIR beat its long-term earnings growth trend and its industry?
AIR's trailing twelve-month earnings (from 31 May 2019) of US$84m has jumped 15% 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 27%, indicating the rate at which AIR is growing has slowed down. Why could this be happening? Well, let's look at what's going on with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, AAR has fallen short of achieving a 20% return on equity (ROE), recording 9.3% instead. Furthermore, its return on assets (ROA) of 6.1% is below the US Aerospace & Defense industry of 7.1%, indicating AAR's are utilized less efficiently. However, its return on capital (ROC), which also accounts for AAR’s debt level, has increased over the past 3 years from 6.8% to 9.6%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 64% to 16% 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 AAR gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research AAR to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AIR’s future growth? Take a look at our free research report of analyst consensus for AIR’s outlook.
- Financial Health: Are AIR’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 May 2019. 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 email@example.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.