After looking at Alleghany Corporation's (NYSE:Y) latest earnings announcement (30 June 2019), I found it useful to revisit the company's performance in the past couple of years and assess this against the most recent figures. 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.
How Well Did Y Perform?
Y's trailing twelve-month earnings (from 30 June 2019) of US$309m has increased by 0.9% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -21%, indicating the rate at which Y is growing has accelerated. What's enabled this growth? Let's see whether it is only a result of industry tailwinds, or if Alleghany has experienced some company-specific growth.
In terms of returns from investment, Alleghany has fallen short of achieving a 20% return on equity (ROE), recording 3.8% instead. Furthermore, its return on assets (ROA) of 1.5% is below the US Insurance industry of 2.5%, indicating Alleghany's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Alleghany’s debt level, has declined over the past 3 years from 3.6% to 2.1%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn't always indicative of a continued optimistic outlook. I recommend you continue to research Alleghany to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for Y’s future growth? Take a look at our free research report of analyst consensus for Y’s outlook.
- Financial Health: Are Y’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 June 2019. This may not be consistent with full year annual report figures.
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