When Wabash National Corporation (NYSE:WNC) announced its most recent earnings (30 June 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Wabash National 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 WNC has performed.
Were WNC’s earnings stronger than its past performances and the industry?
WNC’s trailing twelve-month earnings (from 30 June 2018) of US$121.5m has jumped 22.1% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 16.6%, indicating the rate at which WNC is growing has accelerated. How has it been able to do this? Let’s see whether it is solely a result of industry tailwinds, or if Wabash National has experienced some company-specific growth.
Over the past few years, Wabash National grew its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Looking at growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 29.1% in the previous year, and a more muted 4.9% over the past five. This growth is a median of profitable companies of 25 Machinery companies in US including Taylor Devices, CB Industrial Product Holding Berhad and Barnes Group. This means whatever tailwind the industry is benefiting from, Wabash National has not been able to leverage it as much as its average peer.
In terms of returns from investment, Wabash National has invested its equity funds well leading to a 24.3% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 10.7% exceeds the US Machinery industry of 6.4%, indicating Wabash National has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Wabash National’s debt level, has declined over the past 3 years from 15.8% to 11.5%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Wabash National 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 Wabash National to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WNC’s future growth? Take a look at our free research report of analyst consensus for WNC’s outlook.
- Financial Health: Are WNC’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 email@example.com.