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For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on VSE Corporation ( NASDAQ:VSEC ) useful as an attempt to give more color around how VSE is currently performing.
Commentary On VSEC's Past Performance
VSEC's trailing twelve-month earnings (from 31 March 2019) of US$35m has declined by -11% 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 14%, indicating the rate at which VSEC is growing has slowed down. Why could this be happening? Well, let's look at what's occurring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, VSE has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. Furthermore, its return on assets (ROA) of 5.5% is below the US Commercial Services industry of 6.5%, indicating VSE's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for VSE’s debt level, has declined over the past 3 years from 10% to 7.8%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 53% to 82% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. You should continue to research VSE to get a more holistic view of the stock by looking at:
- Future Outlook : What are well-informed industry analysts predicting for VSEC’s future growth? Take a look at our free research report of analyst consensus for VSEC’s outlook.
- Financial Health : Are VSEC’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 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.