Measuring WestRock Company’s (NYSE:WRK) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess WRK’s recent performance announced on 31 March 2018 and weigh these figures against its long-term trend and industry movements. View out our latest analysis for WestRock
Did WRK’s recent earnings growth beat the long-term trend and the industry?WRK’s trailing twelve-month earnings (from 31 March 2018) of US$1.88b has more than doubled from US$148.40m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 19.61%, indicating the rate at which WRK is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is only because of industry tailwinds, or if WestRock has seen some company-specific growth.
Over the last few years, WestRock grew its bottom line faster than revenue by effectively controlling its costs. This has led to a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US packaging industry has been growing its average earnings by double-digit 11.24% in the prior year, and a less exciting 5.02% over the past half a decade. This growth is a median of profitable companies of 25 Packaging companies in US including Klabin, Nampak and Nampak. This means that any tailwind the industry is deriving benefit from, WestRock is capable of leveraging this to its advantage.In terms of returns from investment, WestRock has not invested its equity funds well, leading to a 16.22% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 8.36% exceeds the US Packaging industry of 6.71%, indicating WestRock has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for WestRock’s debt level, has declined over the past 3 years from 9.57% to 5.16%.
What does this mean?
Though WestRock’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 WestRock to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WRK’s future growth? Take a look at our free research report of analyst consensus for WRK’s outlook.
- Financial Health: Is WRK’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.