For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine The Travelers Companies, Inc.’s (NYSE:TRV) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
Did TRV beat its long-term earnings growth trend and its industry?
TRV’s trailing twelve-month earnings (from 31 December 2018) of US$2.5b has jumped 23% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -12%, indicating the rate at which TRV is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is solely owing to industry tailwinds, or if Travelers Companies has seen some company-specific growth.
In terms of returns from investment, Travelers Companies has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 2.7% exceeds the US Insurance industry of 2.2%, indicating Travelers Companies has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Travelers Companies’s debt level, has declined over the past 3 years from 13% to 8.7%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 26% to 29% over the past 5 years.
What does this mean?
Though Travelers Companies’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn’t always indicative of a continued optimistic outlook. I suggest you continue to research Travelers Companies to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for TRV’s future growth? Take a look at our free research report of analyst consensus for TRV’s outlook.
- Financial Health: Are TRV’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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