Snap-on Incorporated (NYSE:SNA): Has Recent Earnings Growth Beaten Long-Term Trend?

For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Snap-on Incorporated (NYSE:SNA) useful as an attempt to give more color around how Snap-on is currently performing.

Check out our latest analysis for Snap-on

Did SNA’s recent earnings growth beat the long-term trend and the industry?

SNA’s trailing twelve-month earnings (from 28 December 2019) of US$694m has increased by 2.1% 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 10%, indicating the rate at which SNA is growing has slowed down. To understand what’s happening, let’s take a look at what’s transpiring with margins and if the whole industry is experiencing the hit as well.

NYSE:SNA Income Statement, March 10th 2020
NYSE:SNA Income Statement, March 10th 2020

In terms of returns from investment, Snap-on has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the US Machinery industry of 6.3%, indicating Snap-on has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Snap-on’s debt level, has declined over the past 3 years from 23% to 20%.

What does this mean?

Though Snap-on’s past data is helpful, it is only one aspect of my investment thesis. While Snap-on 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 Snap-on to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for SNA’s future growth? Take a look at our free research report of analyst consensus for SNA’s outlook.
  2. Financial Health: Are SNA’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.
  3. 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 28 December 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.