After looking at PerkinElmer, Inc.’s (NYSE:PKI) latest earnings announcement (29 December 2019), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Was PKI’s recent earnings decline worse than the long-term trend and the industry?
PKI’s trailing twelve-month earnings (from 29 December 2019) of US$228m has declined by -3.6% 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 6.3%, indicating the rate at which PKI is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, PerkinElmer has fallen short of achieving a 20% return on equity (ROE), recording 8.1% instead. Furthermore, its return on assets (ROA) of 4.4% is below the US Life Sciences industry of 7.6%, indicating PerkinElmer’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for PerkinElmer’s debt level, has declined over the past 3 years from 8.3% to 7.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 49% to 72% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. You should continue to research PerkinElmer to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PKI’s future growth? Take a look at our free research report of analyst consensus for PKI’s outlook.
- Financial Health: Are PKI’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 29 December 2019. This may not be consistent with full year annual report figures.
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.
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