When Xilinx Inc (NASDAQ:XLNX) released its most recent earnings update (30 June 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Xilinx’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not XLNX actually performed well. Below is a quick commentary on how I see XLNX has performed.
Was XLNX’s recent earnings decline worse than the long-term trend and the industry?
XLNX’s trailing twelve-month earnings (from 30 June 2018) of US$545m has declined by -12% 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 -1.6%, indicating the rate at which XLNX is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, Xilinx has invested its equity funds well leading to a 24% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 10% exceeds the US Semiconductor industry of 8.0%, indicating Xilinx has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Xilinx’s debt level, has increased over the past 3 years from 18% to 20%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that face a prolonged period of decline in earnings are undergoing some sort of reinvestment phase Although, if the whole industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Xilinx and its peers a higher risk investment. You should continue to research Xilinx to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for XLNX’s future growth? Take a look at our free research report of analyst consensus for XLNX’s outlook.
- Financial Health: Are XLNX’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 firstname.lastname@example.org.