Examining American Vanguard Corporation’s (NYSE:AVD) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess AVD’s latest performance announced on 31 March 2018 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for American Vanguard
How AVD fared against its long-term earnings performance and its industry
AVD’s trailing twelve-month earnings (from 31 March 2018) of US$21.48m has jumped 59.73% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -15.57%, indicating the rate at which AVD is growing has accelerated. What’s enabled this growth? Let’s see whether it is solely attributable to an industry uplift, or if American Vanguard has seen some company-specific growth.
Even though both top-line and bottom-line growth rates in the past few years were on average negative, earnings were more so. While this resulted in a margin contraction, it has cushioned American Vanguard’s earnings contraction. Scanning growth from a sector-level, the US chemicals industry has been growing its average earnings by double-digit 15.35% in the past twelve months, and a more subdued 6.25% over the past five. This means that any uplift the industry is enjoying, American Vanguard is able to leverage this to its advantage.
In terms of returns from investment, American Vanguard has not invested its equity funds well, leading to a 6.86% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 4.23% is below the US Chemicals industry of 6.97%, indicating American Vanguard’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for American Vanguard’s debt level, has increased over the past 3 years from 0.07% to 6.09%.
What does this mean?
Though American Vanguard’s past data is helpful, it is only one aspect of my investment thesis. While American Vanguard 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 American Vanguard to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for AVD’s future growth? Take a look at our free research report of analyst consensus for AVD’s outlook.
- Financial Health: Is AVD’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 31 March 2018. 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.