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When Otter Tail Corporation (NASDAQ:OTTR) released its most recent earnings update (31 March 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Otter Tail's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not OTTR actually performed well. Below is a quick commentary on how I see OTTR has performed.
Did OTTR beat its long-term earnings growth trend and its industry?
OTTR's trailing twelve-month earnings (from 31 March 2019) of US$82m has increased by 4.2% 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 10%, indicating the rate at which OTTR is growing has slowed down. What could be happening here? Well, let's examine what's occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Otter Tail has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 5.4% exceeds the US Electric Utilities industry of 4.4%, indicating Otter Tail has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Otter Tail’s debt level, has declined over the past 3 years from 7.0% to 6.6%.
What does this mean?
Otter Tail's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Otter Tail has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Otter Tail to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for OTTR’s future growth? Take a look at our free research report of analyst consensus for OTTR’s outlook.
Financial Health: Are OTTR’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 March 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 firstname.lastname@example.org. 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.