Examining HMN Financial Inc’s (NASDAQ:HMNF) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess HMNF’s latest performance announced on 30 September 2017 and weigh these figures against its longer term trend and industry movements. See our latest analysis for HMN Financial
Was HMNF’s recent earnings decline worse than the long-term trend and the industry?
For the purpose of this commentary, I like to use 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 blend enables me to assess different stocks on a more comparable basis, using the most relevant data points. For HMN Financial, its latest trailing-twelve-month earnings is $5.7M, which compared to last year’s figure, has fallen by -0.0096%. Given that these figures may be relatively myopic, I’ve computed an annualized five-year value for HMNF’s net income, which stands at $2.5M. This suggests that, on average, HMN Financial has been able to increase its earnings over the past few years.
What’s the driver of this growth? Let’s take a look at if it is only attributable to an industry uplift, or if HMN Financial has experienced some company-specific growth. Over the last few years, HMN Financial grew its bottom line faster than revenue by effectively controlling its costs. This has led to a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US mortgage industry has been growing its average earnings by double-digit 10.05% over the prior year, and 13.99% over the previous five years. This means that any tailwind the industry is enjoying, HMN Financial has not been able to reap as much as its industry peers.
What does this mean?
Though HMN Financial’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research HMN Financial to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is HMNF’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.
- 2. Valuation: What is HMNF worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether HMNF is currently mispriced by the market.
- 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.