Hargreaves Lansdown plc (LON:HL.): Has Recent Earnings Growth Beaten Long-Term Trend?
Understanding how Hargreaves Lansdown plc (LSE:HL.) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how Hargreaves Lansdown is doing by comparing its latest earnings with its long-term trend as well as the performance of its capital markets industry peers. Check out our latest analysis for Hargreaves Lansdown
Were HL.’s earnings stronger than its past performances and the industry?
I look at data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to examine many different companies in a uniform manner using the most relevant data points. For Hargreaves Lansdown, its most recent trailing-twelve-month earnings is UK£224.50M, which, relative to the previous year’s level, has risen by 14.43%. Since these figures may be relatively nearsighted, I have determined an annualized five-year value for HL.’s net income, which stands at UK£154.40M This suggests that, on average, Hargreaves Lansdown has been able to steadily grow its earnings over the past couple of years as well.
What’s the driver of this growth? Well, let’s take a look at whether it is merely owing to industry tailwinds, or if Hargreaves Lansdown has experienced some company-specific growth. Over the past couple of years, Hargreaves Lansdown expanded its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Looking at growth from a sector-level, the UK capital markets industry has been growing its average earnings by double-digit 22.48% over the previous twelve months, and 15.34% over the last five years. This suggests that whatever uplift the industry is deriving benefit from, Hargreaves Lansdown has not been able to realize the gains unlike its average peer.
What does this mean?
Hargreaves Lansdown’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Hargreaves Lansdown has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Hargreaves Lansdown to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for HL.’s future growth? Take a look at our free research report of analyst consensus for HL.’s outlook.
2. Financial Health: Is HL.’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 31 December 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.
