In this commentary, I will examine Abercrombie & Fitch Co.'s (NYSE:ANF) latest earnings update (02 November 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the specialty retail industry performed. As an investor, I find it beneficial to assess ANF’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did ANF's recent earnings growth beat the long-term trend and the industry?
ANF's trailing twelve-month earnings (from 02 November 2019) of US$53m has increased by 2.9% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 14%, indicating the rate at which ANF is growing has slowed down. What could be happening here? Well, let's examine what's going on with margins and if the whole industry is feeling the heat.
In terms of returns from investment, Abercrombie & Fitch has fallen short of achieving a 20% return on equity (ROE), recording 5.8% instead. Furthermore, its return on assets (ROA) of 1.7% is below the US Specialty Retail industry of 6.1%, indicating Abercrombie & Fitch's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Abercrombie & Fitch’s debt level, has increased over the past 3 years from 3.2% to 5.0%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 25% to 24% over the past 5 years.
What does this mean?
Though Abercrombie & Fitch's past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn't always indicative of a continued optimistic outlook. You should continue to research Abercrombie & Fitch to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ANF’s future growth? Take a look at our free research report of analyst consensus for ANF’s outlook.
- Financial Health: Are ANF’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 02 November 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.
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