Does Hawaiian Electric Industries Inc’s (NYSE:HE) Past Performance Indicate A Weaker Future?
When Hawaiian Electric Industries Inc (NYSE:HE) announced its most recent earnings (31 March 2018), 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 Hawaiian Electric Industries 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 HE has performed. See our latest analysis for Hawaiian Electric Industries
Was HE’s weak performance lately a part of a long-term decline?
HE’s trailing twelve-month earnings (from 31 March 2018) of US$171.35m has declined by -31.49% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 7.15%, indicating the rate at which HE is growing has slowed down. Why is this? Let’s examine what’s occurring with margins and if the entire industry is facing the same headwind.
In the past couple of years, revenue growth has failed to keep up with earnings, which suggests that Hawaiian Electric Industries’s bottom line has been driven by unsustainable cost-cutting. Viewing growth from a sector-level, the US electric utilities industry has been growing, albeit, at a subdued single-digit rate of 7.88% in the past year, and 5.20% over the past five. This suggests that whatever tailwind the industry is profiting from, Hawaiian Electric Industries has not been able to reap as much as its average peer.
In terms of returns from investment, Hawaiian Electric Industries has not invested its equity funds well, leading to a 8.06% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 2.00% is below the US Electric Utilities industry of 4.21%, indicating Hawaiian Electric Industries’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Hawaiian Electric Industries’s debt level, has increased over the past 3 years from 2.25% to 2.28%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 106.59% to 95.15% over the past 5 years.
What does this mean?
Though Hawaiian Electric Industries’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I recommend you continue to research Hawaiian Electric Industries to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for HE’s future growth? Take a look at our free research report of analyst consensus for HE’s outlook.
Financial Health: Is HE’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 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.
