After looking at Atmos Energy Corporation’s (NYSE:ATO) latest earnings announcement (30 June 2019), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Atmos Energy’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Was ATO’s recent earnings decline worse than the long-term trend and the industry?
ATO’s trailing twelve-month earnings (from 30 June 2019) of US$491m has declined by -18% 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 15%, indicating the rate at which ATO is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Atmos Energy has fallen short of achieving a 20% return on equity (ROE), recording 8.7% instead. However, its return on assets (ROA) of 4.6% exceeds the US Gas Utilities industry of 4.4%, indicating Atmos Energy has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Atmos Energy’s debt level, has declined over the past 3 years from 7.9% to 6.3%.
What does this mean?
Atmos Energy’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. I suggest you continue to research Atmos Energy to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ATO’s future growth? Take a look at our free research report of analyst consensus for ATO’s outlook.
- Financial Health: Are ATO’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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