How RPM International Inc’s (NYSE:RPM) Earnings Growth Stacks Up Against The Industry
Today I will take a look at RPM International Inc’s (NYSE:RPM) most recent earnings update (31 May 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the chemicals industry performed. As an investor, I find it beneficial to assess RPM’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.
Check out our latest analysis for RPM International
How Did RPM’s Recent Performance Stack Up Against Its Past?
RPM’s trailing twelve-month earnings (from 31 May 2018) of US$333.9m has jumped 86.5% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.3%, indicating the rate at which RPM is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is merely due to an industry uplift, or if RPM International has experienced some company-specific growth.
Over the past couple of years, RPM International expanded its bottom line faster than revenue by successfully controlling its costs. This has led to a margin expansion and profitability over time. Inspecting growth from a sector-level, the US chemicals industry has been growing its average earnings by double-digit 24.8% over the previous twelve months, and a more muted 5.5% over the last five years. This growth is a median of profitable companies of 25 Chemicals companies in US including W. R. Grace, ADM Tronics Unlimited and Flexible Solutions International. This suggests that whatever uplift the industry is deriving benefit from, RPM International is capable of leveraging this to its advantage.
In terms of returns from investment, RPM International has invested its equity funds well leading to a 20.8% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.9% exceeds the US Chemicals industry of 7.6%, indicating RPM International has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for RPM International’s debt level, has increased over the past 3 years from 11.2% to 11.2%.
What does this mean?
Though RPM International’s past data is helpful, it is only one aspect of my investment thesis. While RPM International has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research RPM International to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for RPM’s future growth? Take a look at our free research report of analyst consensus for RPM’s outlook.
Financial Health: Are RPM’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 May 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.
