Yahoo Finance Barnes Group Inc (NYSE:B): Does The -58.68% Earnings Drop Reflect A Longer Term Trend?
When Barnes Group Inc (NYSE:B) released its most recent earnings update (31 March 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Barnes Group performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see B has performed. See our latest analysis for Barnes Group
Was B’s weak performance lately a part of a long-term decline?
B’s trailing twelve-month earnings (from 31 March 2018) of US$59.93m has more than halved from US$135.60m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 8.17%, indicating the rate at which B is growing has slowed down. What could be happening here? Well, let’s look at what’s going on with margins and whether the entire industry is experiencing the hit as well.
In the past couple of years, revenue growth has not been able to catch up, which suggests that Barnes Group’s bottom line has been propelled by unmaintainable cost-cutting. Viewing growth from a sector-level, the US machinery industry has been growing its average earnings by double-digit 23.44% in the prior year, and a more subdued 4.62% over the last five years. This means any tailwind the industry is profiting from, Barnes Group has not been able to leverage it as much as its average peer.
In terms of returns from investment, Barnes Group has not invested its equity funds well, leading to a 4.63% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.07% is below the US Machinery industry of 5.76%, indicating Barnes Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Barnes Group’s debt level, has declined over the past 3 years from 10.16% to 9.44%.
What does this mean?
Though Barnes Group’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that experience a drawn out period of decline in earnings are going through some sort of reinvestment phase with the aim of keeping up with the latest industry disruption and growth. You should continue to research Barnes Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for B’s future growth? Take a look at our free research report of analyst consensus for B’s outlook.
Financial Health: Is B’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 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
