After reading Illumina, Inc.'s (NasdaqGS:ILMN) latest earnings update (29 December 2019), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether ILMN has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Did ILMN's recent earnings growth beat the long-term trend and the industry?
ILMN's trailing twelve-month earnings (from 29 December 2019) of US$1.0b has jumped 22% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 18%, indicating the rate at which ILMN is growing has accelerated. How has it been able to do this? Let's take a look at whether it is merely due to an industry uplift, or if Illumina has experienced some company-specific growth.
In terms of returns from investment, Illumina has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the US Life Sciences industry of 7.8%, indicating Illumina has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Illumina’s debt level, has declined over the past 3 years from 16% to 15%.
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 Illumina gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Illumina to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ILMN’s future growth? Take a look at our free research report of analyst consensus for ILMN’s outlook.
- Financial Health: Are ILMN’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 29 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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