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Has A. O. Smith Corporation (NYSE:AOS) Improved Earnings Growth In Recent Times?

Simply Wall St

In this commentary, I will examine A. O. Smith Corporation's (NYSE:AOS) latest earnings update (30 September 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the building industry performed. As an investor, I find it beneficial to assess AOS’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.

See our latest analysis for A. O. Smith

Did AOS's recent earnings growth beat the long-term trend and the industry?

AOS's trailing twelve-month earnings (from 30 September 2019) of US$405m 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 AOS is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is only a result of industry tailwinds, or if A. O. Smith has seen some company-specific growth.

NYSE:AOS Income Statement, November 7th 2019

In terms of returns from investment, A. O. Smith has invested its equity funds well leading to a 24% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14% exceeds the US Building industry of 8.1%, indicating A. O. Smith has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for A. O. Smith’s debt level, has increased over the past 3 years from 21% to 22%.

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 A. O. Smith gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research A. O. Smith to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AOS’s future growth? Take a look at our free research report of analyst consensus for AOS’s outlook.
  2. Financial Health: Are AOS’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.
  3. 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.

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 editorial-team@simplywallst.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.