A O Smith Corporation’s (NYSE:AOS) Earnings Dropped -4.7%, How Did It Fare Against The Industry?
Examining how A O Smith Corporation (NYSE:AOS) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how A. O. Smith is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its building industry peers.
View our latest analysis for A. O. Smith
Did AOS perform worse than its track record and industry?
AOS’s trailing twelve-month earnings (from 30 June 2018) of US$330m has declined by -4.7% compared to the previous year.
Furthermore, 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 AOS is growing has slowed down. What could be happening here? Let’s examine what’s going on with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, A. O. Smith has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 11% exceeds the US Building industry of 8.9%, 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 16% to 24%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 17% to 14% over the past 5 years.
What does this mean?
Though A. O. Smith’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors influencing its business. I suggest you continue to research A. O. Smith to get a better picture of the stock by looking at:
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.
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.
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 June 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 editorial-team@simplywallst.com.
