Advance Auto Parts, Inc.'s (NYSE:AAP) Earnings Dropped -20%, How Did It Fare Against The Industry?

Examining Advance Auto Parts, Inc.'s (NYSE:AAP) 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 AAP's latest performance announced on 05 October 2019 and compare these figures to its longer term trend and industry movements.

View our latest analysis for Advance Auto Parts

How Well Did AAP Perform?

AAP's trailing twelve-month earnings (from 05 October 2019) of US$444m has declined by -20% 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 -1.4%, indicating the rate at which AAP is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is experiencing the hit as well.

In terms of returns from investment, Advance Auto Parts has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 4.4% is below the US Specialty Retail industry of 5.9%, indicating Advance Auto Parts's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Advance Auto Parts’s debt level, has declined over the past 3 years from 20% to 11%.

What does this mean?

Advance Auto Parts's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Typically companies that face a prolonged period of decline in earnings are undergoing some sort of reinvestment phase Although, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes Advance Auto Parts and its peers a riskier investment. You should continue to research Advance Auto Parts to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for AAP’s future growth? Take a look at our free research report of analyst consensus for AAP’s outlook.
2. Financial Health: Are AAP’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.
3. 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 05 October 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 editorial-team@simplywallst.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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