Yahoo Finance Does Eaton Corporation plc’s (NYSE:ETN) Recent Track Record Look Strong?
After reading Eaton Corporation plc’s (NYSE:ETN) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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. Check out our latest analysis for Eaton
Were ETN’s earnings stronger than its past performances and the industry?
I prefer to use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This blend enables me to analyze different companies on a similar basis, using the most relevant data points. For Eaton, its most recent bottom-line (trailing twelve month) is US$3.04B, which, against last year’s level, has moved up by a non-trivial 56.17%. Since these values are relatively short-term, I have determined an annualized five-year value for ETN’s net income, which stands at US$1.81B This means that, on average, Eaton has been able to increasingly improve its net income over the past couple of years as well.
What’s enabled this growth? Let’s take a look at whether it is solely owing to an industry uplift, or if Eaton has experienced some company-specific growth. In the past couple of years, Eaton expanded its bottom line faster than revenue by efficiently controlling its costs. This has caused a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US electrical industry has been growing, albeit, at a muted single-digit rate of 8.20% over the past twelve months, and a substantial 13.48% over the last five years. This means that whatever tailwind the industry is enjoying, Eaton is capable of amplifying this to its advantage.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Eaton has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Eaton to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ETN’s future growth? Take a look at our free research report of analyst consensus for ETN’s outlook.
Financial Health: Is ETN’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 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.
