After looking at Cooper Tire & Rubber Company's (NYSE:CTB) latest earnings update (30 September 2019), I found it helpful to revisit the company's performance in the past couple of years 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 an important aspect. In this article I briefly touch on my key findings.
Could CTB beat the long-term trend and outperform its industry?
CTB's trailing twelve-month earnings (from 30 September 2019) of US$45m has jumped 28% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -25%, indicating the rate at which CTB is growing has accelerated. How has it been able to do this? Let's take a look at if it is merely a result of industry tailwinds, or if Cooper Tire & Rubber has seen some company-specific growth.
In terms of returns from investment, Cooper Tire & Rubber has fallen short of achieving a 20% return on equity (ROE), recording 3.6% instead. Furthermore, its return on assets (ROA) of 2.5% is below the US Auto Components industry of 6.2%, indicating Cooper Tire & Rubber's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Cooper Tire & Rubber’s debt level, has declined over the past 3 years from 22% to 10.0%.
What does this mean?
Though Cooper Tire & Rubber's past data is helpful, it is only one aspect of my investment thesis. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. You should continue to research Cooper Tire & Rubber to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CTB’s future growth? Take a look at our free research report of analyst consensus for CTB’s outlook.
- Financial Health: Are CTB’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 30 September 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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