Today I will take a look at Aggreko Plc's (LSE:AGK) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the commercial services industry performed. As an investor, I find it beneficial to assess AGK’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
How AGK fared against its long-term earnings performance and its industry
AGK's trailing twelve-month earnings (from 30 June 2019) of UK£123m has jumped 17% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -17%, indicating the rate at which AGK is growing has accelerated. How has it been able to do this? Let's take a look at whether it is merely owing to an industry uplift, or if Aggreko has experienced some company-specific growth.
In terms of returns from investment, Aggreko has fallen short of achieving a 20% return on equity (ROE), recording 9.0% instead. However, its return on assets (ROA) of 6.2% exceeds the GB Commercial Services industry of 4.9%, indicating Aggreko has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Aggreko’s debt level, has declined over the past 3 years from 12% to 10%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There may be factors that are influencing the entire industry hence the high industry growth rate over the same time frame. I suggest you continue to research Aggreko to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AGK’s future growth? Take a look at our free research report of analyst consensus for AGK’s outlook.
- Financial Health: Are AGK’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 2019. This may not be consistent with full year annual report figures.
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