After looking at Hibbett Sports Inc’s (NASDAQ:HIBB) latest earnings update (04 August 2018), I found it helpful to revisit the company’s performance in the past couple of years 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 an important aspect. In this article I briefly touch on my key findings.
Was HIBB’s recent earnings decline indicative of a tough track record?
HIBB’s trailing twelve-month earnings (from 04 August 2018) of US$38m has declined by -14% 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 -13%, indicating the rate at which HIBB is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Hibbett Sports has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 7.5% is below the US Specialty Retail industry of 7.7%, indicating Hibbett Sports’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Hibbett Sports’s debt level, has declined over the past 3 years from 32% to 15%.
What does this mean?
Though Hibbett Sports’s past data is helpful, it is only one aspect of my investment thesis. Usually companies that experience a prolonged period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the recent industry growth and disruption. You should continue to research Hibbett Sports to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HIBB’s future growth? Take a look at our free research report of analyst consensus for HIBB’s outlook.
- Financial Health: Are HIBB’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 04 August 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.