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Does Hilton Food Group plc's (LON:HFG) 31% Earnings Growth Reflect The Long-Term Trend?

Simply Wall St

After reading Hilton Food Group plc's (LSE:HFG) latest earnings update (31 December 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether HFG has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.

See our latest analysis for Hilton Food Group

How HFG fared against its long-term earnings performance and its industry

HFG's trailing twelve-month earnings (from 31 December 2018) of UK£33m has jumped 31% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 13%, indicating the rate at which HFG is growing has accelerated. How has it been able to do this? Let's take a look at if it is solely a result of industry tailwinds, or if Hilton Food Group has seen some company-specific growth.

LSE:HFG Income Statement, October 14th 2019

In terms of returns from investment, Hilton Food Group has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 6.2% exceeds the GB Food industry of 5.4%, indicating Hilton Food Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Hilton Food Group’s debt level, has declined over the past 3 years from 28% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 49% to 62% over the past 5 years.

What does this mean?

Hilton Food Group's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. 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 Hilton Food Group to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for HFG’s future growth? Take a look at our free research report of analyst consensus for HFG’s outlook.
  2. Financial Health: Are HFG’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.
  3. 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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.