For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Praxair Inc’s (NYSE:PX) 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.
Was PX’s recent earnings decline indicative of a tough track record?
PX’s trailing twelve-month earnings (from 30 June 2018) of US$1.4b has declined by -9.5% 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 -5.3%, indicating the rate at which PX is growing has slowed down. Why is this? Well, let’s look at what’s transpiring with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Praxair has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.9% exceeds the US Chemicals industry of 7.8%, indicating Praxair has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Praxair’s debt level, has increased over the past 3 years from 14% to 15%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 139% to 129% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience a prolonged period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. I recommend you continue to research Praxair to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PX’s future growth? Take a look at our free research report of analyst consensus for PX’s outlook.
- Financial Health: Are PX’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 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.