For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on CCL Industries Inc (TSE:CCL.B) useful as an attempt to give more color around how CCL Industries is currently performing.
Did CCL.B’s recent earnings growth beat the long-term trend and the industry?
CCL.B’s trailing twelve-month earnings (from 30 June 2018) of CA$516.1m has jumped 35.0% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 28.0%, indicating the rate at which CCL.B is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at if it is only because of an industry uplift, or if CCL Industries has experienced some company-specific growth.
In the past few years, CCL Industries grew its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time.
Looking at growth from a sector-level, the Canadian packaging industry has been growing its average earnings by double-digit 11.7% in the prior twelve months, and 27.9% over the past half a decade. This growth is a median of profitable companies of 8 Packaging companies in CA including Cascades, IPL Plastics and IPL Plastics. This shows that any tailwind the industry is profiting from, CCL Industries is capable of leveraging this to its advantage.
In terms of returns from investment, CCL Industries has invested its equity funds well leading to a 21.4% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.7% exceeds the CA Packaging industry of 8.5%, indicating CCL Industries has used its assets more efficiently. However, its return on capital (ROC), which also accounts for CCL Industries’s debt level, has declined over the past 3 years from 17.3% to 12.3%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 85.3% to 113% over the past 5 years.
What does this mean?
Though CCL Industries’s past data is helpful, it is only one aspect of my investment thesis. While CCL Industries has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research CCL Industries to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CCL.B’s future growth? Take a look at our free research report of analyst consensus for CCL.B’s outlook.
- Financial Health: Are CCL.B’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 June 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 email@example.com.