For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine James Hardie Industries plc’s (ASX:JHX) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. See our latest analysis for James Hardie Industries
Did JHX beat its long-term earnings growth trend and its industry?
I look at the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method enables me to analyze different companies on a more comparable basis, using the latest information. For James Hardie Industries, its most recent bottom-line (trailing twelve month) is $256.2M, which, against last year’s figure, has climbed up by 29.20%. Since these values may be fairly myopic, I have determined an annualized five-year value for James Hardie Industries’s net income, which stands at $205.7M. This shows that, generally, James Hardie Industries has been able to consistently improve its profits over the past few years as well.
What’s enabled this growth? Let’s take a look at if it is merely a result of industry tailwinds, or if James Hardie Industries has experienced some company-specific growth. In the last few years, James Hardie Industries expanded its bottom line faster than revenue by efficiently controlling its costs. This resulted in a margin expansion and profitability over time. Inspecting growth from a sector-level, the Australian basic materials industry has been growing its average earnings by double-digit 16.14% over the prior year, and a more subdued 5.38% over the previous five years. This means whatever tailwind the industry is profiting from, James Hardie Industries is able to amplify this to its advantage.
What does this mean?
Though James Hardie Industries’s past data is helpful, it is only one aspect of my investment thesis. 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 James Hardie Industries to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for JHX’s future growth? Take a look at our free research report of analyst consensus for JHX’s outlook.
2. Financial Health: Is JHX’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 30 September 2017. 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.