Assessing Berkshire Hathaway Inc’s (NYSE:BRK.A) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess BRK.A’s recent performance announced on 31 March 2018 and evaluate these figures to its long-term trend and industry movements. Check out our latest analysis for Berkshire Hathaway
How BRK.A fared against its long-term earnings performance and its industryBRK.A’s trailing twelve-month earnings (from 31 March 2018) of US$39.74b has jumped 76.28% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 14.73%, indicating the rate at which BRK.A is growing has accelerated. How has it been able to do this? Well, let’s take a look at if it is only due to an industry uplift, or if Berkshire Hathaway has seen some company-specific growth.
Over the past couple of years, Berkshire Hathaway increased its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Inspecting growth from a sector-level, the US diversified financial industry has been growing its average earnings by double-digit 14.60% in the previous twelve months, and 13.59% over the previous five years. This suggests that whatever tailwind the industry is profiting from, Berkshire Hathaway is able to leverage this to its advantage.In terms of returns from investment, Berkshire Hathaway has not invested its equity funds well, leading to a 11.44% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 6.39% exceeds the US Diversified Financial industry of 3.41%, indicating Berkshire Hathaway has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Berkshire Hathaway’s debt level, has declined over the past 3 years from 6.86% to 2.76%.
What does this mean?
Though Berkshire Hathaway’s past data is helpful, it is only one aspect of my investment thesis. 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 Berkshire Hathaway to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BRK.A’s future growth? Take a look at our free research report of analyst consensus for BRK.A’s outlook.
- Financial Health: Is BRK.A’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.