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When Gentex Corporation (NASDAQ:GNTX) released its most recent earnings update (31 March 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Gentex has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see GNTX has performed.
Did GNTX's recent earnings growth beat the long-term trend and the industry?
GNTX's trailing twelve-month earnings (from 31 March 2019) of US$431m has increased by 2.6% compared to the previous year.
However, 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 GNTX is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Gentex has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 20% exceeds the US Auto Components industry of 7.1%, indicating Gentex has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Gentex’s debt level, has increased over the past 3 years from 24% to 26%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 19% to 0.1% over the past 5 years.
What does this mean?
Though Gentex's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Gentex to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GNTX’s future growth? Take a look at our free research report of analyst consensus for GNTX’s outlook.
- Financial Health: Are GNTX’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 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.