U.S. Markets open in 6 hrs 21 mins

Should You Be Happy With Hormel Foods Corporation's (NYSE:HRL) Performance Lately?

Simply Wall St

When Hormel Foods Corporation (NYSE:HRL) released its most recent earnings update (28 July 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Hormel Foods's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not HRL actually performed well. Below is a quick commentary on how I see HRL has performed.

Check out our latest analysis for Hormel Foods

Commentary On HRL's Past Performance

HRL's trailing twelve-month earnings (from 28 July 2019) of US$985m has increased by 1.7% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 10%, indicating the rate at which HRL is growing has slowed down. To understand what's happening, let's examine what's occurring with margins and if the rest of the industry is facing the same headwind.

NYSE:HRL Income Statement, September 24th 2019

In terms of returns from investment, Hormel Foods has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 12% exceeds the US Food industry of 6.0%, indicating Hormel Foods has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Hormel Foods’s debt level, has declined over the past 3 years from 24% to 17%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Hormel Foods gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Hormel Foods to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for HRL’s future growth? Take a look at our free research report of analyst consensus for HRL’s outlook.
  2. Financial Health: Are HRL’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 28 July 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.