After looking at Plexus Corp.’s (NasdaqGS:PLXS) latest earnings update (04 January 2020), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
How Did PLXS’s Recent Performance Stack Up Against Its Past?
PLXS’s trailing twelve-month earnings (from 04 January 2020) of US$117m has declined by -13% 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 0.5%, indicating the rate at which PLXS is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and whether the whole industry is feeling the heat.
In terms of returns from investment, Plexus has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 6.2% is below the US Electronic industry of 6.3%, indicating Plexus’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Plexus’s debt level, has increased over the past 3 years from 11% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 33% to 28% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research Plexus to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PLXS’s future growth? Take a look at our free research report of analyst consensus for PLXS’s outlook.
- Financial Health: Are PLXS’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 04 January 2020. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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.
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