When Ingredion Incorporated (NYSE:INGR) released its most recent earnings update (30 June 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Ingredion performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see INGR has performed.
How INGR fared against its long-term earnings performance and its industry
INGR’s trailing twelve-month earnings (from 30 June 2018) of US$519.0m has increased by 5.7% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 4.7%, indicating the rate at which INGR is growing has accelerated. What’s enabled this growth? Let’s take a look at if it is merely owing to industry tailwinds, or if Ingredion has experienced some company-specific growth.
Over the past couple of years, Ingredion grew bottom-line, while its top-line declined, by successfully controlling its costs. This has caused to a margin expansion and profitability over time. Scanning growth from a sector-level, the US food industry has been growing, albeit, at a unexciting single-digit rate of 5.1% in the previous twelve months, and 7.8% over the past five years. This growth is a median of profitable companies of 25 Food companies in US including Fraser and Neave, Greencore Group and Greencore Group. This suggests that whatever uplift the industry is gaining from, Ingredion is capable of amplifying this to its advantage.
In terms of returns from investment, Ingredion has fallen short of achieving a 20% return on equity (ROE), recording 18.6% instead. However, its return on assets (ROA) of 10.2% exceeds the US Food industry of 6.9%, indicating Ingredion has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Ingredion’s debt level, has increased over the past 3 years from 12.2% to 16.2%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 73.0% to 58.6% over the past 5 years.
What does this mean?
Though Ingredion’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Ingredion gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Ingredion to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for INGR’s future growth? Take a look at our free research report of analyst consensus for INGR’s outlook.
- Financial Health: Are INGR’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.