Should The Travelers Companies Inc’s (NYSE:TRV) Recent Earnings Decline Worry You?
Understanding The Travelers Companies Inc’s (NYSE:TRV) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Travelers Companies is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. View our latest analysis for Travelers Companies
Was TRV’s recent earnings decline worse than the long-term trend and the industry?
I like to use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to examine many different companies on a similar basis, using the latest information. “For Travelers Companies, its “, most recent bottom-line is $2,431.0M, which compared to the prior year’s figure, has plunged by -16.57%. Given that these values may be somewhat short-term, I have created an annualized five-year figure for Travelers Companies’s earnings, which stands at $2,934.0M. This doesn’t look much better, as earnings seem to have steadily been falling over time.
Why could this be happening? Let’s examine what’s occurring with margins and if the whole industry is feeling the heat. In the past couple of years, revenue growth has not been able to catch up, which indicates that Travelers Companies’s bottom line has been driven by unsustainable cost-cutting. Eyeballing growth from a sector-level, the US insurance industry has been growing, albeit, at a muted single-digit rate of 6.15% in the past year, and 8.46% over the past five years. This means any tailwind the industry is profiting from, Travelers Companies has not been able to reap as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Typically companies that endure an extended period of decline in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and expansion. I recommend you continue to research Travelers Companies to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for TRV’s future growth? Take a look at our free research report of analyst consensus for TRV’s outlook.
2. Financial Health: Is TRV’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass 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.
