With A -7.9% Earnings Drop, Did National Presto Industries, Inc. (NYSE:NPK) Really Underperform?

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When National Presto Industries, Inc. (NYSE:NPK) released its most recent earnings update (31 December 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well National Presto Industries has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see NPK has performed.

View our latest analysis for National Presto Industries

Was NPK’s weak performance lately a part of a long-term decline?

NPK’s trailing twelve-month earnings (from 31 December 2018) of US$40m has declined by -7.9% 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 5.7%, indicating the rate at which NPK is growing has slowed down. Why is this? Well, let’s take a look at what’s going on with margins and if the entire industry is feeling the heat.

NYSE:NPK Income Statement, May 7th 2019
NYSE:NPK Income Statement, May 7th 2019

In terms of returns from investment, National Presto Industries has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 9.6% exceeds the US Aerospace & Defense industry of 7.2%, indicating National Presto Industries has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for National Presto Industries’s debt level, has declined over the past 3 years from 18% to 14%.

What does this mean?

National Presto Industries’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 capricious earnings, can have many factors impacting its business. I recommend you continue to research National Presto Industries to get a more holistic view of the stock by looking at:

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