Understanding The Hackett Group Inc’s (NASDAQ:HCKT) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Hackett Group is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period.
Did HCKT’s recent earnings growth beat the long-term trend and the industry?
HCKT’s trailing twelve-month earnings (from 29 June 2018) of US$34m has jumped 38% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 26%, indicating the rate at which HCKT is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is solely because of an industry uplift, or if Hackett Group has experienced some company-specific growth.
In terms of returns from investment, Hackett Group has invested its equity funds well leading to a 28% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 18% exceeds the US IT industry of 6.8%, indicating Hackett Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Hackett Group’s debt level, has increased over the past 3 years from 18% to 25%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 15% to 11% over the past 5 years.
What does this mean?
Though Hackett Group’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? I recommend you continue to research Hackett Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HCKT’s future growth? Take a look at our free research report of analyst consensus for HCKT’s outlook.
- Financial Health: Are HCKT’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 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.