When The Hanover Insurance Group, Inc.'s (NYSE:THG) announced its latest earnings (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Hanover Insurance Group's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not THG actually performed well. Below is a quick commentary on how I see THG has performed.
Did THG's recent earnings growth beat the long-term trend and the industry?
THG's trailing twelve-month earnings (from 31 December 2018) of US$239m has jumped 11% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -6.2%, indicating the rate at which THG is growing has accelerated. How has it been able to do this? Let's see if it is solely because of industry tailwinds, or if Hanover Insurance Group has experienced some company-specific growth.
In terms of returns from investment, Hanover Insurance Group has fallen short of achieving a 20% return on equity (ROE), recording 8.1% instead. However, its return on assets (ROA) of 2.3% exceeds the US Insurance industry of 2.2%, indicating Hanover Insurance Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Hanover Insurance Group’s debt level, has declined over the past 3 years from 13% to 4.8%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Hanover Insurance Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Hanover Insurance Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for THG’s future growth? Take a look at our free research report of analyst consensus for THG’s outlook.
- Financial Health: Are THG’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 31 December 2018. This may not be consistent with full year annual report figures.
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