When HEICO Corporation (NYSE:HEI) released its most recent earnings update (30 April 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well HEICO has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see HEI has performed.
Did HEI's recent earnings growth beat the long-term trend and the industry?
HEI's trailing twelve-month earnings (from 30 April 2019) of US$296m has jumped 32% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 20%, indicating the rate at which HEI is growing has accelerated. How has it been able to do this? Let's take a look at whether it is solely attributable to an industry uplift, or if HEICO has experienced some company-specific growth.
In terms of returns from investment, HEICO has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 11% exceeds the US Aerospace & Defense industry of 6.7%, indicating HEICO has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for HEICO’s debt level, has increased over the past 3 years from 13% to 16%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 58% to 30% over the past 5 years.
What does this mean?
Though HEICO's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as HEICO gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research HEICO to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HEI’s future growth? Take a look at our free research report of analyst consensus for HEI’s outlook.
- Financial Health: Are HEI’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 2019. This may not be consistent with full year annual report figures.
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