In this commentary, I will examine Xcel Energy Inc.'s (NasdaqGS:XEL) latest earnings update (31 December 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the electric utilities industry performed. As an investor, I find it beneficial to assess XEL’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Were XEL's earnings stronger than its past performances and the industry?
XEL's trailing twelve-month earnings (from 31 December 2019) of US$1.4b has increased by 8.8% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.0%, indicating the rate at which XEL is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is merely a result of an industry uplift, or if Xcel Energy has experienced some company-specific growth.
In terms of returns from investment, Xcel Energy has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 4.3% exceeds the US Electric Utilities industry of 4.1%, indicating Xcel Energy has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Xcel Energy’s debt level, has declined over the past 3 years from 5.8% to 4.5%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 125% to 141% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Xcel Energy 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 Xcel Energy to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for XEL’s future growth? Take a look at our free research report of analyst consensus for XEL’s outlook.
- Financial Health: Are XEL’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 December 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 firstname.lastname@example.org. 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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