Does Applied Industrial Technologies, Inc.’s (NYSE:AIT) Past Performance Indicate A Weaker Future?

Assessing Applied Industrial Technologies, Inc.’s (NYSE:AIT) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess AIT’s latest performance announced on 31 March 2019 and evaluate these figures to its historical trend and industry movements.

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Despite a decline, did AIT underperform the long-term trend and the industry?

AIT’s trailing twelve-month earnings (from 31 March 2019) of US$145m has declined by -6.3% 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 9.3%, indicating the rate at which AIT is growing has slowed down. What could be happening here? Well, let’s look at what’s transpiring with margins and whether the rest of the industry is experiencing the hit as well.

NYSE:AIT Income Statement, May 21st 2019
NYSE:AIT Income Statement, May 21st 2019

In terms of returns from investment, Applied Industrial Technologies has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 8.0% exceeds the US Trade Distributors industry of 5.6%, indicating Applied Industrial Technologies has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Applied Industrial Technologies’s debt level, has declined over the past 3 years from 15% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 4.0% to 111% over the past 5 years.

What does this mean?

Applied Industrial Technologies’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 unpredictable earnings, can have many factors affecting its business. I suggest you continue to research Applied Industrial Technologies to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AIT’s future growth? Take a look at our free research report of analyst consensus for AIT’s outlook.
  2. Financial Health: Are AIT’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 31 March 2019. 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 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. Thank you for reading.