For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Pilgrim's Pride Corporation (NasdaqGS:PPC) useful as an attempt to give more color around how Pilgrim's Pride is currently performing.
Commentary On PPC's Past Performance
PPC's trailing twelve-month earnings (from 29 September 2019) of US$357m has declined by -9.0% 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 -16%, indicating the rate at which PPC is growing has slowed down. Why is this? Let's examine what's occurring with margins and if the entire industry is experiencing the hit as well.
In terms of returns from investment, Pilgrim's Pride has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 7.2% exceeds the US Food industry of 6.3%, indicating Pilgrim's Pride has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Pilgrim's Pride’s debt level, has declined over the past 3 years from 34% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 24% to 99% over the past 5 years.
What does this mean?
Pilgrim's Pride's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. In some cases, companies that face a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase Although, if the entire industry is struggling to grow over time, it may be a indicator of a structural shift, which makes Pilgrim's Pride and its peers a higher risk investment. You should continue to research Pilgrim's Pride to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PPC’s future growth? Take a look at our free research report of analyst consensus for PPC’s outlook.
- Financial Health: Are PPC’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 September 2019. This may not be consistent with full year annual report figures.
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.
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. Thank you for reading.