Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at Brady Corporation's (NYSE:BRC) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
Did BRC beat its long-term earnings growth trend and its industry?
BRC's trailing twelve-month earnings (from 31 January 2020) of US$142m has jumped 18% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 42%, indicating the rate at which BRC is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, Brady has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 11% exceeds the US Commercial Services industry of 6.0%, indicating Brady has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Brady’s debt level, has increased over the past 3 years from 15% to 17%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 43% to 5.5% over the past 5 years.
What does this mean?
Though Brady'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? You should continue to research Brady to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BRC’s future growth? Take a look at our free research report of analyst consensus for BRC’s outlook.
- Financial Health: Are BRC’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 January 2020. 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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