Measuring Lear Corporation's (NYSE:LEA) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess LEA's recent performance announced on 31 December 2018 and weigh these figures against its long-term trend and industry movements.
Despite a decline, did LEA underperform the long-term trend and the industry?
LEA's trailing twelve-month earnings (from 31 December 2018) of US$1.1b has declined by -12% 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 21%, indicating the rate at which LEA is growing has slowed down. Why is this? Well, let's look at what's occurring with margins and whether the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Lear has invested its equity funds well leading to a 28% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the US Auto Components industry of 7.6%, indicating Lear has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Lear’s debt level, has increased over the past 3 years from 23% to 24%.
What does this mean?
Lear's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I suggest you continue to research Lear to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for LEA’s future growth? Take a look at our free research report of analyst consensus for LEA’s outlook.
- Financial Health: Are LEA’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 2018. This may not be consistent with full year annual report figures.
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