In this article, I will take a look at FMC Corporation's (NYSE:FMC) 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 FMC'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.
How FMC fared against its long-term earnings performance and its industry
FMC's trailing twelve-month earnings (from 31 March 2020) of US$547m has increased by 7.9% 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 55%, indicating the rate at which FMC is growing has slowed down. Why could this be happening? Well, let's examine what's transpiring with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, FMC has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 7.0% exceeds the US Chemicals industry of 6.1%, indicating FMC has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for FMC’s debt level, has increased over the past 3 years from 8.5% to 14%.
What does this mean?
Though FMC's past data is helpful, it is only one aspect of my investment thesis. While FMC 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 FMC to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FMC’s future growth? Take a look at our free research report of analyst consensus for FMC’s outlook.
- Financial Health: Are FMC’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 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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