Understanding Simpson Manufacturing Co., Inc.’s (NYSE:SSD) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Simpson Manufacturing is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period.
Did SSD beat its long-term earnings growth trend and its industry?
SSD’s trailing twelve-month earnings (from 31 December 2018) of US$127m has jumped 37% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 17%, indicating the rate at which SSD is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is only a result of industry tailwinds, or if Simpson Manufacturing has seen some company-specific growth.
In terms of returns from investment, Simpson Manufacturing has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 12% exceeds the US Building industry of 8.7%, indicating Simpson Manufacturing has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Simpson Manufacturing’s debt level, has increased over the past 3 years from 13% to 19%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Simpson Manufacturing to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SSD’s future growth? Take a look at our free research report of analyst consensus for SSD’s outlook.
- Financial Health: Are SSD’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.
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