Today I will take a look at RGC Resources, Inc.'s (NasdaqGM:RGCO) most recent earnings update (30 September 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the gas utilities industry performed. As an investor, I find it beneficial to assess RGCO’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
How Well Did RGCO Perform?
RGCO's trailing twelve-month earnings (from 30 September 2019) of US$8.7m has jumped 19% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 13%, indicating the rate at which RGCO is growing has accelerated. What's enabled this growth? Let's take a look at if it is only owing to an industry uplift, or if RGC Resources has seen some company-specific growth.
In terms of returns from investment, RGC Resources has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 4.8% exceeds the US Gas Utilities industry of 4.4%, indicating RGC Resources has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for RGC Resources’s debt level, has declined over the past 3 years from 8.2% to 4.9%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 76% to 125% 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 RGC Resources gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research RGC Resources to get a more holistic view of the stock by looking at:
- Financial Health: Are RGCO’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.
- Valuation: What is RGCO worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether RGCO is currently mispriced by the market.
- 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 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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