With A -5.6% Earnings Drop, Did Hammond Manufacturing Company Limited (TSE:HMM.A) Really Underperform?
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Examining how Hammond Manufacturing Company Limited (TSE:HMM.A) is performing as a company requires looking at more than just a years' earnings. Below, I will run you through a simple sense check to build perspective on how Hammond Manufacturing is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its electrical industry peers.
See our latest analysis for Hammond Manufacturing
Despite a decline, did HMM.A underperform the long-term trend and the industry?
HMM.A's trailing twelve-month earnings (from 29 March 2019) of CA$4.4m has declined by -5.6% 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 5.0%, indicating the rate at which HMM.A is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, Hammond Manufacturing has fallen short of achieving a 20% return on equity (ROE), recording 8.4% instead. Furthermore, its return on assets (ROA) of 5.4% is below the CA Electrical industry of 7.0%, indicating Hammond Manufacturing's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Hammond Manufacturing’s debt level, has declined over the past 3 years from 14% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 35% to 82% over the past 5 years.
What does this mean?
Though Hammond Manufacturing's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. You should continue to research Hammond Manufacturing to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for HMM.A’s future growth? Take a look at our free research report of analyst consensus for HMM.A’s outlook.
Financial Health: Are HMM.A’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 29 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 editorial-team@simplywallst.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.
