Today I will take a look at Hexcel Corporation’s (NYSE:HXL) most recent earnings update (30 June 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the aerospace & defense industry performed. As an investor, I find it beneficial to assess HXL’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.
How Well Did HXL Perform?
HXL’s trailing twelve-month earnings (from 30 June 2018) of US$288m has jumped 14% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.3%, indicating the rate at which HXL is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is only a result of an industry uplift, or if Hexcel has experienced some company-specific growth.
In terms of returns from investment, Hexcel has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the US Aerospace & Defense industry of 6.9%, indicating Hexcel has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Hexcel’s debt level, has declined over the past 3 years from 17% to 13%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 30% to 67% over the past 5 years.
What does this mean?
Though Hexcel’s past data is helpful, it is only one aspect of my investment thesis. While Hexcel has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Hexcel to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HXL’s future growth? Take a look at our free research report of analyst consensus for HXL’s outlook.
- Financial Health: Are HXL’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 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 firstname.lastname@example.org.