When The J M Smucker Company (NYSE:SJM) released its most recent earnings update (30 April 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were J. M. Smucker’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not SJM actually performed well. Below is a quick commentary on how I see SJM has performed.
Could SJM beat the long-term trend and outperform its industry?
SJM’s trailing twelve-month earnings (from 30 April 2018) of US$1.33b has more than doubled from US$589.50m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 11.04%, indicating the rate at which SJM is growing has accelerated. What’s enabled this growth? Let’s see whether it is only attributable to an industry uplift, or if J. M. Smucker has experienced some company-specific growth.
Over the last couple of years, J. M. Smucker grew its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Inspecting growth from a sector-level, the US food industry has been growing, albeit, at a subdued single-digit rate of 5.67% over the past twelve months, and 7.86% over the past five years. This growth is a median of profitable companies of 25 Food companies in US including Fraser and Neave, Greencore Group and Greencore Group. This means that any uplift the industry is profiting from, J. M. Smucker is capable of amplifying this to its advantage.
In terms of returns from investment, J. M. Smucker has fallen short of achieving a 20% return on equity (ROE), recording 16.96% instead. However, its return on assets (ROA) of 9.84% exceeds the US Food industry of 6.93%, indicating J. M. Smucker has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for J. M. Smucker’s debt level, has increased over the past 3 years from 4.83% to 7.62%.
What does this mean?
Though J. M. Smucker’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research J. M. Smucker to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SJM’s future growth? Take a look at our free research report of analyst consensus for SJM’s outlook.
- Financial Health: Are SJM’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 30 April 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.