After looking at The Eastern Company’s (NASDAQ:EML) latest earnings announcement (30 June 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Did EML beat its long-term earnings growth trend and its industry?
EML’s trailing twelve-month earnings (from 30 June 2018) of US$8m has increased by 4.7% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 1.1%, indicating the rate at which EML is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is only owing to an industry uplift, or if Eastern has experienced some company-specific growth.
In terms of returns from investment, Eastern has fallen short of achieving a 20% return on equity (ROE), recording 9.1% instead. Furthermore, its return on assets (ROA) of 5.3% is below the US Machinery industry of 6.9%, indicating Eastern’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Eastern’s debt level, has increased over the past 3 years from 8.2% to 11%.
What does this mean?
Though Eastern’s past data is helpful, it is only one aspect of my investment thesis. While Eastern has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Eastern to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for EML’s future growth? Take a look at our free research report of analyst consensus for EML’s outlook.
- Financial Health: Are EML’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 firstname.lastname@example.org.