Does McCormick Company, Incorporated's (NYSE:MKC) Past Performance Indicate A Weaker Future?
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After reading McCormick & Company, Incorporated's (NYSE:MKC) most recent earnings announcement (28 February 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
See our latest analysis for McCormick
Was MKC's recent earnings decline indicative of a tough track record?
MKC's trailing twelve-month earnings (from 28 February 2019) of US$659m has declined by -18% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 17%, indicating the rate at which MKC is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and whether the whole industry is feeling the heat.
In terms of returns from investment, McCormick has fallen short of achieving a 20% return on equity (ROE), recording 20% instead. However, its return on assets (ROA) of 8.2% exceeds the US Food industry of 5.8%, indicating McCormick has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for McCormick’s debt level, has declined over the past 3 years from 19% to 11%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 65% to 142% over the past 5 years.
What does this mean?
Though McCormick's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. I recommend you continue to research McCormick to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MKC’s future growth? Take a look at our free research report of analyst consensus for MKC’s outlook.
Financial Health: Are MKC’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 28 February 2019. 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.
