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SPX Corporation (NYSE:SPXC): Does The Earnings Decline Make It An Underperformer?

Simply Wall St

When SPX Corporation (NYSE:SPXC) announced its most recent earnings (31 December 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how SPX performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see SPXC has performed.

View our latest analysis for SPX

Was SPXC's recent earnings decline worse than the long-term trend and the industry?

SPXC's trailing twelve-month earnings (from 31 December 2019) of US$75m has declined by -3.7% 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 54%, indicating the rate at which SPXC is growing has slowed down. Why is this? Well, let’s take a look at what’s going on with margins and if the whole industry is facing the same headwind.

NYSE:SPXC Income Statement, February 27th 2020

In terms of returns from investment, SPX has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. Furthermore, its return on assets (ROA) of 4.4% is below the US Machinery industry of 6.5%, indicating SPX's are utilized less efficiently. However, its return on capital (ROC), which also accounts for SPX’s debt level, has increased over the past 3 years from 5.0% to 6.8%.

What does this mean?

Though SPX's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I suggest you continue to research SPX to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for SPXC’s future growth? Take a look at our free research report of analyst consensus for SPXC’s outlook.
  2. Financial Health: Are SPXC’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 31 December 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 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.

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