Elevator manufacturer Otis (NYSE:OTIS) missed Wall Street’s revenue expectations in Q4 CY2025 as sales rose 3.3% year on year to $3.80 billion. The company’s full-year revenue guidance of $15.15 billion at the midpoint came in 0.7% below analysts’ estimates. Its non-GAAP profit of $1.03 per share was in line with analysts’ consensus estimates.

Otis (OTIS) Q4 CY2025 Highlights:

• Revenue: $3.80 billion vs analyst estimates of $3.87 billion (3.3% year-on-year growth, 1.8% miss)
• Adjusted EPS: $1.03 vs analyst estimates of $1.03 (in line)
• Adjusted EBITDA: $651 million vs analyst estimates of $675.7 million (17.1% margin, 3.7% miss)
• Operating Margin: 15.5%, up from 14.4% in the same quarter last year
• Free Cash Flow Margin: 20.3%, up from 17.7% in the same quarter last year
• Organic Revenue rose 1% year on year (miss)
• Market Capitalization: $35.29 billion

Company Overview

Credited with inventing the first hydraulic passenger elevator, Otis Worldwide (NYSE:OTIS) is an elevator and escalator manufacturing, installation and service company.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Otis grew its sales at a sluggish 2.5% compounded annual growth rate. This was below our standards and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Otis’s recent performance shows its demand has slowed as its revenue was flat over the last two years.

Otis also reports organic revenue, which strips out one-time events like acquisitions and currency fluctuations that don’t accurately reflect its fundamentals. Over the last two years, Otis’s organic revenue was flat. Because this number aligns with its two-year revenue growth, we can see the company’s core operations (not acquisitions and divestitures) drove most of its results.

This quarter, Otis’s revenue grew by 3.3% year on year to $3.80 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 5.5% over the next 12 months. Although this projection indicates its newer products and services will catalyze better top-line performance, it is still below average for the sector.

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Operating Margin

Otis’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 14.8% over the last five years. This profitability was top-notch for an industrials business, showing it’s an well-run company with an efficient cost structure. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Otis’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Otis generated an operating margin profit margin of 15.5%, up 1.1 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Otis’s EPS grew at a remarkable 12.1% compounded annual growth rate over the last five years, higher than its 2.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Otis’s earnings to better understand the drivers of its performance. A five-year view shows that Otis has repurchased its stock, shrinking its share count by 10.1%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Otis, its two-year annual EPS growth of 7% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Otis reported adjusted EPS of $1.03, up from $0.93 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects Otis’s full-year EPS of $4.05 to grow 9%.

Key Takeaways from Otis’s Q4 Results

We struggled to find many positives in these results. Its revenue missed and its EBITDA fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 2.7% to $88.11 immediately following the results.

Otis’s latest earnings report disappointed. One quarter doesn’t define a company’s quality, so let’s explore whether the stock is a buy at the current price. We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy.

Aerospace and defense company Textron (NYSE:TXT) reported Q4 CY2025 results beating Wall Street’s revenue expectations , with sales up 15.6% year on year to $4.18 billion. The company expects the full year’s revenue to be around $15.5 billion, close to analysts’ estimates. Its non-GAAP profit of $1.73 per share was 1.5% above analysts’ consensus estimates.

Textron (TXT) Q4 CY2025 Highlights:

• Revenue: $4.18 billion vs analyst estimates of $4.08 billion (15.6% year-on-year growth, 2.3% beat)
• Adjusted EPS: $1.73 vs analyst estimates of $1.70 (1.5% beat)
• Adjusted EBITDA: $492 million vs analyst estimates of $497.5 million (11.8% margin, 1.1% miss)
• Adjusted EPS guidance for the upcoming financial year 2026 is $6.50 at the midpoint, missing analyst estimates by 4.9%
• Operating Margin: 9.1%, in line with the same quarter last year
• Free Cash Flow Margin: 12.6%, up from 8.2% in the same quarter last year
• Market Capitalization: $16.61 billion

Company Overview

Listed on the NYSE in 1947, Textron (NYSE:TXT) provides products and services in the aerospace, defense, industrial, and finance sectors.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can have short-term success, but a top-tier one grows for years. Regrettably, Textron’s sales grew at a tepid 4.9% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Textron’s annualized revenue growth of 4% over the last two years aligns with its five-year trend, suggesting its demand was consistently weak.

This quarter, Textron reported year-on-year revenue growth of 15.6%, and its $4.18 billion of revenue exceeded Wall Street’s estimates by 2.3%.

Looking ahead, sell-side analysts expect revenue to grow 4.3% over the next 12 months, similar to its two-year rate. This projection is underwhelming and suggests its newer products and services will not catalyze better top-line performance yet.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Textron’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 8.5% over the last five years. This profitability was higher than the broader industrials sector, showing it did a decent job managing its expenses.

Analyzing the trend in its profitability, Textron’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Textron generated an operating margin profit margin of 9.1%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Textron’s EPS grew at an astounding 24.2% compounded annual growth rate over the last five years, higher than its 4.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Textron’s quality of earnings can give us a better understanding of its performance. A five-year view shows that Textron has repurchased its stock, shrinking its share count by 22.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Textron, its two-year annual EPS growth of 4.5% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Textron reported adjusted EPS of $1.73, up from $1.34 in the same quarter last year. This print beat analysts’ estimates by 1.5%. Over the next 12 months, Wall Street expects Textron’s full-year EPS of $6.11 to grow 12.8%.

Key Takeaways from Textron’s Q4 Results

We enjoyed seeing Textron beat analysts’ revenue expectations this quarter. On the other hand, its full-year EPS guidance missed and its EBITDA fell slightly short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 4% to $90.50 immediately following the results.

Should you buy the stock or not? If you’re making that decision, you should consider the bigger picture of valuation, business qualities, as well as the latest earnings.

Jet fuel is one of the biggest expenses involved in running an airline. Cutting back on jet fuel expenses without cutting service, therefore, can be a major win. And aerospace giant Boeing BA -1.56% ▼ may have something coming up in the near term that will address the issue quite well. This news, however, proved to be little help at all for investors, as shares dropped nearly 2% in Tuesday afternoon’s trading.

Boeing, working with the Technion-Israel Institute of Technology, is now on the implementation phase of a new aviation fuel known as “electrofuel.” This fuel is made from a combination of green hydrogen and “captured carbon dioxide.” Boeing recently sent Boeing Global President, Dr. Brendan Nelson, to Technion to catch up on the project.

With the implementation phase now at hand, the duo will work toward practical development measures that will make the electrofuel available at competitive costs. Interestingly, Boeing’s connection to Israel goes back several decades, between commercial aircraft sales to El Al ELALF -18.06% ▼ and defense sales to the Israeli Air Force. Boeing’s own estimates figure that its relationship to Israel goes back about 75 years.

“A Lot to Be Optimistic About”

Boeing’s fourth quarter earnings report, meanwhile, brought with it one serious win: a 57% jump in quarterly sales. Admittedly, some of that was brought about by President Trump’s trade tour, which frequently featured deals for Boeing aircraft as a quick and easy way to shore up trade deficits.

Meanwhile, CEO Kelly Ortberg revealed that there was “…a lot to be optimistic about” going into 2026. However, Ortberg tempered that remark by stating, “At the same time, with progress comes expectations, and our customers and stakeholders are going to expect more from us this year.”

Is Boeing a Good Stock to Buy Right Now?

Turning to Wall Street, analysts have a Strong Buy consensus rating on BA stock based on 14 Buys, two Holds and one Sell assigned in the past three months, as indicated by the graphic below. After a 39.74% rally in its share price over the past year, the average BA price target of $258.85 per share implies 6.71% upside potential.

Regional bank Provident Financial Services (NYSE:PFS) reported revenue ahead of Wall Streets expectations in Q4 CY2025, with sales up 9.6% year on year to $225.7 million. Its GAAP profit of $0.64 per share was 15.1% above analysts’ consensus estimates.

Provident Financial Services (PFS) Q4 CY2025 Highlights:

• Net Interest Income: $197.4 million vs analyst estimates of $197.2 million (8.6% year-on-year growth, in line)
• Net Interest Margin: 3.4% vs analyst estimates of 3.4% (in line)
• Revenue: $225.7 million vs analyst estimates of $223.5 million (9.6% year-on-year growth, 1% beat)
• Efficiency Ratio: 51% vs analyst estimates of 50.6% (37 basis point miss)
• EPS (GAAP): $0.64 vs analyst estimates of $0.56 (15.1% beat)
• Tangible Book Value per Share: $15.70 vs analyst estimates of $15.50 (14.9% year-on-year growth, 1.3% beat)
• Market Capitalization: $2.69 billion

Anthony J. Labozzetta, President and Chief Executive Officer commented, “Provident Bank finished 2025 with a third consecutive quarter of record revenues, notable momentum across all our business lines and strong profitability. Organic growth remains our top priority, supported by a loan pipeline that has consistently been over $2.5 billion for the past four quarters, and several investments we have made to sustain growth in non-interest income. Our organization continues to focus on several strategic initiatives to help profitably grow our business, including growing our market share in middle market banking, insurance and wealth management. Looking ahead to 2026, we expect continued earnings per share growth and to compound tangible book value, while also making the necessary investments to sustain our momentum over the long-term.”

Company Overview

Founded in 1839 and serving communities across New Jersey, Pennsylvania, and New York, Provident Financial Services (NYSE:PFS) operates a regional bank providing commercial, residential, and consumer lending alongside wealth management and insurance services.

Sales Growth

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions. Thankfully, Provident Financial Services’s 17.7% annualized revenue growth over the last five years was excellent. Its growth beat the average banking company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Provident Financial Services’s annualized revenue growth of 34.8% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Provident Financial Services reported year-on-year revenue growth of 9.6%, and its $225.7 million of revenue exceeded Wall Street’s estimates by 1%.

Net interest income made up 84.2% of the company’s total revenue during the last five years, meaning Provident Financial Services barely relies on non-interest income to drive its overall growth.

Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.

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Tangible Book Value Per Share (TBVPS)

Banks are balance sheet-driven businesses because they generate earnings primarily through borrowing and lending. They’re also valued based on their balance sheet strength and ability to compound book value (another name for shareholders’ equity) over time.

Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. EPS can become murky due to acquisition impacts or accounting flexibility around loan provisions, and TBVPS resists financial engineering manipulation.

Provident Financial Services’s TBVPS was flat over the last five years. A turnaround doesn’t seem to be in sight as its TBVPS also dropped by 2.1% annually over the last two years ($16.39 to $15.70 per share).

Over the next 12 months, Consensus estimates call for Provident Financial Services’s TBVPS to grow by 8.9% to $17.10, paltry growth rate.

Key Takeaways from Provident Financial Services’s Q4 Results

It was good to see Provident Financial Services beat analysts’ EPS expectations this quarter. We were also happy its tangible book value per share narrowly outperformed Wall Street’s estimates. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $21.02 immediately following the results.

Sure, Provident Financial Services had a solid quarter, but if we look at the bigger picture, is this stock a buy? What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock.

Analog chip manufacturer Texas Instruments (NASDAQ:TXN) fell short of the markets revenue expectations in Q4 CY2025, but sales rose 10.4% year on year to $4.42 billion. On the other hand, next quarter’s outlook exceeded expectations with revenue guided to $4.5 billion at the midpoint, or 1.7% above analysts’ estimates. Its GAAP profit of $1.27 per share was 2.9% below analysts’ consensus estimates.

Texas Instruments (TXN) Q4 CY2025 Highlights:

• Revenue: $4.42 billion vs analyst estimates of $4.46 billion (10.4% year-on-year growth, 0.8% miss)
• EPS (GAAP): $1.27 vs analyst expectations of $1.31 (2.9% miss)
• Adjusted EBITDA: $2.09 billion vs analyst estimates of $2.05 billion (47.3% margin, 1.9% beat)
• Revenue Guidance for Q1 CY2026 is $4.5 billion at the midpoint, above analyst estimates of $4.42 billion
• EPS (GAAP) guidance for Q1 CY2026 is $1.35 at the midpoint, beating analyst estimates by 5.6%
• Operating Margin: 33.3%, down from 34.4% in the same quarter last year
• Free Cash Flow Margin: 30%, up from 20.1% in the same quarter last year
• Inventory Days Outstanding: 224, up from 218 in the previous quarter
• Market Capitalization: $178.6 billion

Company Overview

Headquartered in Dallas, Texas since the 1950s, Texas Instruments (NASDAQ:TXN) is the world’s largest producer of analog semiconductors.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Texas Instruments’s sales grew at a mediocre 4.1% compounded annual growth rate over the last five years. This fell short of our benchmark for the semiconductor sector and is a tough starting point for our analysis. Semiconductors are a cyclical industry, and long-term investors should be prepared for periods of high growth followed by periods of revenue contractions.

Packaging Corporation of America (NYSE:PKG) missed Wall Street’s revenue expectations in Q4 CY2025, but sales rose 10.1% year on year to $2.36 billion. Its non-GAAP profit of $2.32 per share was 3.9% below analysts’ consensus estimates.

Packaging Corporation of America (PKG) Q4 CY2025 Highlights:

• Revenue: $2.36 billion vs analyst estimates of $2.44 billion (10.1% year-on-year growth, 2.9% miss)
• Adjusted EPS: $2.32 vs analyst expectations of $2.41 (3.9% miss)
• Adjusted EBITDA: $486.3 million vs analyst estimates of $503.7 million (20.6% margin, 3.5% miss)
• Operating Margin: 7.1%, down from 14.1% in the same quarter last year
• Sales Volumes rose 7.4% year on year, in line with the same quarter last year
• Market Capitalization: $19.83 billion

Commenting on reported results, Mark W. Kowlzan, Chairman and CEO, said, “Corrugated shipments during the quarter were slightly down from record 2024 levels, and our results reflected a seasonally less rich mix with strong e-commerce volume through the holiday season and continued inventory management from other customers. Our order book strengthened as the fourth quarter progressed and we’ve seen significantly improved demand throughout our customer base so far in January. We made tremendous progress on the integration of the Greif business and have no planned outages at the acquired mills during the first half of the year. Our paper business performed well, with higher year-over-year volumes, strong price realization and exceptional customer service. We repurchased 760,000 shares during the quarter at an average price of $201 per share. On the whole, we had a very strong year with growth in our earnings excluding special items and operating cash flows, driven by the tremendous efforts of our employees and the benefits of our capital investments across our business and we are well positioned for continued profitable growth.”

Company Overview

Founded in 1959, Packaging Corporation of America (NYSE: PKG) produces containerboard and corrugated packaging products as well as displays and package protection.

Revenue Growth

A company’s long-term sales performance is one signal of its overall quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Packaging Corporation of America grew its sales at a mediocre 6.2% compounded annual growth rate. This fell short of our benchmark for the industrials sector and is a rough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Packaging Corporation of America’s annualized revenue growth of 7.3% over the last two years is above its five-year trend, but we were still disappointed by the results.

Packaging Corporation of America also reports its number of units sold, which reached 1.41 million in the latest quarter. Over the last two years, Packaging Corporation of America’s units sold averaged 6.9% year-on-year growth. Because this number is in line with its revenue growth, we can see the company kept its prices fairly consistent.

This quarter, Packaging Corporation of America’s revenue grew by 10.1% year on year to $2.36 billion but fell short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 13% over the next 12 months, an improvement versus the last two years. This projection is noteworthy and implies its newer products and services will fuel better top-line performance.

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Operating Margin

Packaging Corporation of America has been an efficient company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.4%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, Packaging Corporation of America’s operating margin decreased by 3.7 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

In Q4, Packaging Corporation of America generated an operating margin profit margin of 7.1%, down 7 percentage points year on year. Since Packaging Corporation of America’s operating margin decreased more than its gross margin, we can assume it was less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Packaging Corporation of America’s EPS grew at a solid 11.2% compounded annual growth rate over the last five years, higher than its 6.2% annualized revenue growth. However, this alone doesn’t tell us much about its business quality because its operating margin didn’t improve.

We can take a deeper look into Packaging Corporation of America’s earnings quality to better understand the drivers of its performance. A five-year view shows that Packaging Corporation of America has repurchased its stock, shrinking its share count by 4.7%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Packaging Corporation of America, its two-year annual EPS growth of 6.4% was lower than its five-year trend. We hope its growth can accelerate in the future.

In Q4, Packaging Corporation of America reported adjusted EPS of $2.32, down from $2.47 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Packaging Corporation of America’s full-year EPS of $9.84 to grow 12.2%.

Key Takeaways from Packaging Corporation of America’s Q4 Results

We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 2.2% to $218.76 immediately following the results.

Packaging Corporation of America may have had a tough quarter, but does that actually create an opportunity to invest right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy.

Health insurance company UnitedHealth (NYSE:UNH) met Wall Streets revenue expectations in Q4 CY2025, with sales up 12.3% year on year to $113.2 billion. On the other hand, the company’s full-year revenue guidance of $439 billion at the midpoint came in 3.7% below analysts’ estimates. Its non-GAAP profit of $2.11 per share was in line with analysts’ consensus estimates.

UnitedHealth (UNH) Q4 CY2025 Highlights:

• Revenue: $113.2 billion vs analyst estimates of $113.6 billion (12.3% year-on-year growth, in line)
• Adjusted EPS: $2.11 vs analyst estimates of $2.11 (in line)
• Adjusted EPS guidance for the upcoming financial year 2026 is $17.75 at the midpoint, in line with analyst estimates
• Operating Margin: 0.3%, down from 7.7% in the same quarter last year
• Free Cash Flow Margin: 0.1%, down from 1.4% in the same quarter last year
• Market Capitalization: $318.5 billion

“We confronted challenges directly and finished 2025 as a much stronger company, giving us the momentum to better serve those who count on us and continue to improve our core performance,” said Stephen Hemsley, chief executive officer of UnitedHealth Group.

Company Overview

With over 100 million people served across its various businesses and a workforce of more than 400,000, UnitedHealth Group (NYSE:UNH) operates a health insurance business and Optum, a healthcare services division that provides everything from pharmacy benefits to primary care.

Revenue Growth

Reviewing a company’s long-term sales performance reveals insights into its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, UnitedHealth grew its sales at a decent 11.7% compounded annual growth rate. Its growth was slightly above the average healthcare company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. UnitedHealth’s annualized revenue growth of 9.7% over the last two years is below its five-year trend, but we still think the results were respectable.

This quarter, UnitedHealth’s year-on-year revenue growth was 12.3%, and its $113.2 billion of revenue was in line with Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 1.8% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges. At least the company is tracking well in other measures of financial health.

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Operating Margin

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

UnitedHealth was profitable over the last five years but held back by its large cost base. Its average operating margin of 7.5% was weak for a healthcare business.

Looking at the trend in its profitability, UnitedHealth’s operating margin decreased by 4.1 percentage points over the last five years. The company’s two-year trajectory also shows it failed to get its profitability back to the peak as its margin fell by 4.5 percentage points. This performance was poor no matter how you look at it – it shows its expenses were rising and it couldn’t pass those costs onto its customers.

This quarter, UnitedHealth’s breakeven margin was down 7.4 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

UnitedHealth’s flat EPS over the last five years was below its 11.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded due to non-fundamental factors such as interest expenses and taxes.

We can take a deeper look into UnitedHealth’s earnings to better understand the drivers of its performance. As we mentioned earlier, UnitedHealth’s operating margin declined by 4.1 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, UnitedHealth reported adjusted EPS of $2.11, down from $6.81 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects UnitedHealth’s full-year EPS of $16.31 to grow 8.8%.

Key Takeaways from UnitedHealth’s Q4 Results

We struggled to find many positives in these results. Its full-year revenue guidance missed and its revenue was in line with Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 12.3% to $308.54 immediately following the results.

UnitedHealth didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? We think that the latest quarter is just one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.

Graham’s (NYSE:GHM) stock is up by a considerable 26% over the past three months. As most would know, fundamentals are what usually guide market price movements over the long-term, so we decided to look at the company’s key financial indicators today to determine if they have any role to play in the recent price movement. Specifically, we decided to study Graham’s ROE in this article.

Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. In simpler terms, it measures the profitability of a company in relation to shareholder’s equity.

How Is ROE Calculated?

Return on equity can be calculated by using the formula:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Graham is:

11% = US$14m ÷ US$128m (Based on the trailing twelve months to September 2025).

The ‘return’ is the amount earned after tax over the last twelve months. Another way to think of that is that for every $1 worth of equity, the company was able to earn $0.11 in profit.

See our latest analysis for Graham

What Is The Relationship Between ROE And Earnings Growth?

We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. Depending on how much of these profits the company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.

Graham’s Earnings Growth And 11% ROE

At first glance, Graham’s ROE doesn’t look very promising. However, its ROE is similar to the industry average of 11%, so we won’t completely dismiss the company. Particularly, the exceptional 57% net income growth seen by Graham over the past five years is pretty remarkable. Considering the moderately low ROE, it is quite possible that there might be some other aspects that are positively influencing the company’s earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.

Next, on comparing with the industry net income growth, we found that Graham’s growth is quite high when compared to the industry average growth of 16% in the same period, which is great to see.

Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Graham is trading on a high P/E or a low P/E, relative to its industry.

Is Graham Making Efficient Use Of Its Profits?

Graham doesn’t pay any regular dividends currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the high earnings growth number that we discussed above.

Summary

In total, it does look like Graham has some positive aspects to its business. With a high rate of reinvestment, albeit at a low ROE, the company has managed to see a considerable growth in its earnings. With that said, the latest industry analyst forecasts reveal that the company’s earnings growth is expected to slow down. To know more about the company’s future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.

In this article we are going to estimate the intrinsic value of Rollins, Inc. (NYSE:ROL) by taking the forecast future cash flows of the company and discounting them back to today’s value. One way to achieve this is by employing the Discounted Cash Flow (DCF) model. It may sound complicated, but actually it is quite simple!

We would caution that there are many ways of valuing a company and, like the DCF, each technique has advantages and disadvantages in certain scenarios. For those who are keen learners of equity analysis, the Simply Wall St analysis model here may be something of interest to you.

Is Rollins Fairly Valued?

We are going to use a two-stage DCF model, which, as the name states, takes into account two stages of growth. The first stage is generally a higher growth period which levels off heading towards the terminal value, captured in the second ‘steady growth’ period. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren’t available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.

A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we need to discount the sum of these future cash flows to arrive at a present value estimate:

2026	2027	2028	2029	2030	2031	2032	2033	2034	2035
Levered FCF ($, Millions)	US$737.1m	US$834.3m	US$927.0m	US$961.0m	US$992.7m	US$1.03b	US$1.06b	US$1.09b	US$1.13b	US$1.17b
Growth Rate Estimate Source	Analyst x7	Analyst x4	Analyst x3	Analyst x1	Est @ 3.30%	Est @ 3.29%	Est @ 3.28%	Est @ 3.27%	Est @ 3.27%	Est @ 3.27%
Present Value ($, Millions) Discounted @ 7.0%	US$689	US$729	US$757	US$733	US$708	US$684	US$660	US$637	US$615	US$593

(“Est” = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$6.8b

After calculating the present value of future cash flows in the initial 10-year period, we need to calculate the Terminal Value, which accounts for all future cash flows beyond the first stage. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country’s GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.3%) to estimate future growth. In the same way as with the 10-year ‘growth’ period, we discount future cash flows to today’s value, using a cost of equity of 7.0%.

Terminal Value (TV)= FCF₂₀₃₅ × (1 + g) ÷ (r – g) = US$1.2b× (1 + 3.3%) ÷ (7.0%– 3.3%) = US$32b

Present Value of Terminal Value (PVTV)= TV / (1 + r)¹⁰= US$32b÷ ( 1 + 7.0%)¹⁰= US$16b

The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$23b. In the final step we divide the equity value by the number of shares outstanding. Relative to the current share price of US$62.9, the company appears potentially overvalued at the time of writing. Remember though, that this is just an approximate valuation, and like any complex formula – garbage in, garbage out.

The Assumptions

We would point out that the most important inputs to a discounted cash flow are the discount rate and of course the actual cash flows. You don’t have to agree with these inputs, I recommend redoing the calculations yourself and playing with them. The DCF also does not consider the possible cyclicality of an industry, or a company’s future capital requirements, so it does not give a full picture of a company’s potential performance. Given that we are looking at Rollins as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we’ve used 7.0%, which is based on a levered beta of 0.808. Beta is a measure of a stock’s volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.

SWOT Analysis for Rollins

Strength

Earnings growth over the past year exceeded the industry.

Debt is not viewed as a risk.

Dividends are covered by earnings and cash flows.

Weakness

Earnings growth over the past year is below its 5-year average.

Dividend is low compared to the top 25% of dividend payers in the Commercial Services market.

Expensive based on P/E ratio and estimated fair value.

Opportunity

Annual earnings are forecast to grow for the next 4 years.

SWOT Analysis for Rollins

Strength

• Earnings growth over the past year exceeded the industry.

• Debt is not viewed as a risk.

• Dividends are covered by earnings and cash flows.

Weakness

• Earnings growth over the past year is below its 5-year average.

• Dividend is low compared to the top 25% of dividend payers in the Commercial Services market.

• Expensive based on P/E ratio and estimated fair value.

Opportunity

• Annual earnings are forecast to grow for the next 4 years.

Threat

• Annual earnings are forecast to grow slower than the American market.

Looking Ahead:

Valuation is only one side of the coin in terms of building your investment thesis, and it is only one of many factors that you need to assess for a company. The DCF model is not a perfect stock valuation tool. Preferably you’d apply different cases and assumptions and see how they would impact the company’s valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. What is the reason for the share price exceeding the intrinsic value? For Rollins, we’ve put together three pertinent factors you should consider:

1. Financial Health: Does ROL have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
2. Future Earnings: How does ROL’s growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
3. Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!

PS. Simply Wall St updates its DCF calculation for every American stock every day, so if you want to find the intrinsic value of any other stock just search here.

 

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you’d generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Service Corporation International (NYSE:SCI) share price is up 60% in the last five years, that’s less than the market return. Meanwhile, the last twelve months saw the share price rise 1.0%.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).

During five years of share price growth, Service Corporation International achieved compound earnings per share (EPS) growth of 8.2% per year. So the EPS growth rate is rather close to the annualized share price gain of 10% per year. That suggests that the market sentiment around the company hasn’t changed much over that time. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Service Corporation International’s key metrics by checking this interactive graph of Service Corporation International’s earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Service Corporation International’s TSR for the last 5 years was 73%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Service Corporation International shareholders are up 2.7% for the year (even including dividends). But that return falls short of the market. On the bright side, the longer term returns (running at about 12% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It’s always interesting to track share price performance over the longer term. But to understand Service Corporation International better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we’ve spotted with Service Corporation International .