For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Watts Water Technologies, Inc. (NYSE:WTS) useful as an attempt to give more color around how Watts Water Technologies is currently performing.
How Did WTS’s Recent Performance Stack Up Against Its Past?
WTS’s trailing twelve-month earnings (from 30 June 2019) of US$131m has jumped 49% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 30%, indicating the rate at which WTS is growing has accelerated. How has it been able to do this? Let’s see if it is solely attributable to industry tailwinds, or if Watts Water Technologies has experienced some company-specific growth.
In terms of returns from investment, Watts Water Technologies has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. However, its return on assets (ROA) of 8.7% exceeds the US Machinery industry of 7.5%, indicating Watts Water Technologies has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Watts Water Technologies’s debt level, has increased over the past 3 years from 5.2% to 15%.
What does this mean?
Though Watts Water Technologies’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Watts Water Technologies gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Watts Water Technologies to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WTS’s future growth? Take a look at our free research report of analyst consensus for WTS’s outlook.
- Financial Health: Are WTS’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 30 June 2019. This may not be consistent with full year annual report figures.
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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.