Does W.W. Grainger, Inc.’s (NYSE:GWW) 25% Earnings Growth Make It An Outperformer?

Examining how W.W. Grainger, Inc. (NYSE:GWW) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how W.W. Grainger is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its trade distributors industry peers.

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See our latest analysis for W.W. Grainger

How GWW fared against its long-term earnings performance and its industry

GWW’s trailing twelve-month earnings (from 31 March 2019) of US$796m has jumped 25% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -3.6%, indicating the rate at which GWW is growing has accelerated. What’s enabled this growth? Well, let’s take a look at whether it is only owing to an industry uplift, or if W.W. Grainger has seen some company-specific growth.

NYSE:GWW Income Statement, May 16th 2019
NYSE:GWW Income Statement, May 16th 2019

In terms of returns from investment, W.W. Grainger has invested its equity funds well leading to a 39% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 14% exceeds the US Trade Distributors industry of 5.8%, indicating W.W. Grainger has used its assets more efficiently. However, its return on capital (ROC), which also accounts for W.W. Grainger’s debt level, has declined over the past 3 years from 32% to 30%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 17% to 112% over the past 5 years.

What does this mean?

W.W. Grainger’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While W.W. Grainger has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research W.W. Grainger to get a more holistic view of the stock by looking at:

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