When Aqua America, Inc. (NYSE:WTR) announced its most recent earnings (30 September 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Aqua America has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see WTR has performed.
Commentary On WTR’s Past Performance
WTR’s trailing twelve-month earnings (from 30 September 2018) of US$249m has increased by 5.6% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 3.5%, indicating the rate at which WTR is growing has accelerated. What’s the driver of this growth? Let’s see if it is merely due to an industry uplift, or if Aqua America has experienced some company-specific growth.
In terms of returns from investment, Aqua America has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. However, its return on assets (ROA) of 5.1% exceeds the US Water Utilities industry of 4.2%, indicating Aqua America has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Aqua America’s debt level, has declined over the past 3 years from 5.8% to 5.2%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 109% to 118% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Aqua America has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Aqua America to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WTR’s future growth? Take a look at our free research report of analyst consensus for WTR’s outlook.
- Financial Health: Are WTR’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.