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.
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.
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:
- 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.
- 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.
- 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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