Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Valmont Industries, Inc.'s (NYSE:VMI) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
How Well Did VMI Perform?
VMI's trailing twelve-month earnings (from 29 June 2019) of US$100m has declined by -3.8% 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 -11%, indicating the rate at which VMI is growing has slowed down. Why is this? Well, let's look at what's going on with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Valmont Industries has fallen short of achieving a 20% return on equity (ROE), recording 9.3% instead. Furthermore, its return on assets (ROA) of 5.1% is below the US Construction industry of 5.5%, indicating Valmont Industries's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Valmont Industries’s debt level, has declined over the past 3 years from 12% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 31% to 70% over the past 5 years.
What does this mean?
Valmont Industries's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. In some cases, companies that experience an extended period of diminishing earnings are undergoing some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Valmont Industries and its peers a riskier investment. I suggest you continue to research Valmont Industries to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for VMI’s future growth? Take a look at our free research report of analyst consensus for VMI’s outlook.
Financial Health: Are VMI’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 29 June 2019. This may not be consistent with full year annual report figures.
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