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Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Austal Limited’s (ASX:ASB) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Did ASB beat its long-term earnings growth trend and its industry?
ASB’s trailing twelve-month earnings (from 31 December 2018) of AU$40m has jumped 35% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -12%, indicating the rate at which ASB is growing has accelerated. What’s enabled this growth? Let’s see whether it is only owing to an industry uplift, or if Austal has seen some company-specific growth.
In terms of returns from investment, Austal has fallen short of achieving a 20% return on equity (ROE), recording 6.8% instead. Furthermore, its return on assets (ROA) of 4.1% is below the AU Aerospace & Defense industry of 5.1%, indicating Austal’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Austal’s debt level, has increased over the past 3 years from 5.7% to 8.1%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 49% to 31% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Austal gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Austal to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ASB’s future growth? Take a look at our free research report of analyst consensus for ASB’s outlook.
- Financial Health: Are ASB’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 December 2018. 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 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. Thank you for reading.