Yahoo Finance The Travelers Companies, Inc. (NYSE:TRV): Does The -8.5% Earnings Drop Reflect A Longer Term Trend?
In this article, I will take a look at The Travelers Companies, Inc.'s (NYSE:TRV) most recent earnings update (31 March 2020) and compare these latest figures against its performance over the past few years, along with how the rest of TRV's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
View our latest analysis for Travelers Companies
Was TRV's recent earnings decline worse than the long-term trend and the industry?
TRV's trailing twelve-month earnings (from 31 March 2020) of US$2.4b has declined by -8.5% 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 -9.1%, indicating the rate at which TRV is growing has slowed down. What could be happening here? Well, let's look at what's transpiring with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Travelers Companies has fallen short of achieving a 20% return on equity (ROE), recording 9.6% instead. However, its return on assets (ROA) of 2.5% exceeds the US Insurance industry of 2.3%, indicating Travelers Companies has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Travelers Companies’s debt level, has declined over the past 3 years from 10% to 7.7%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 26% to 26% over the past 5 years.
What does this mean?
Though Travelers Companies's past data is helpful, it is only one aspect of my investment thesis. Generally companies that endure a prolonged period of decline in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry expansion and disruption. I recommend you continue to research Travelers Companies to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for TRV’s future growth? Take a look at our free research report of analyst consensus for TRV’s outlook.
Financial Health: Are TRV’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 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 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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