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For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on EMCOR Group, Inc. (NYSE:EME) useful as an attempt to give more color around how EMCOR Group is currently performing.
How Did EME's Recent Performance Stack Up Against Its Past?
EME's trailing twelve-month earnings (from 31 December 2019) of US$325m has jumped 14% 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 15%, indicating the rate at which EME is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, EMCOR Group has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 7.0% exceeds the US Construction industry of 6.2%, 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 14% to 16%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 23% 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? I recommend you continue to research EMCOR Group to get a more holistic view 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 31 December 2019. This may not be consistent with full year annual report figures.
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.
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