After reading HNI Corporation's (NYSE:HNI) latest earnings update (29 December 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether HNI has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Commentary On HNI's Past Performance
HNI's trailing twelve-month earnings (from 29 December 2018) of US$93m has increased by 4.3% 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 5.3%, indicating the rate at which HNI is growing has slowed down. Why could this be happening? Well, let's look at what's occurring with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, HNI has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 7.3% exceeds the US Commercial Services industry of 6.9%, indicating HNI has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for HNI’s debt level, has declined over the past 3 years from 22% to 15%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 35% to 44% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research HNI to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HNI’s future growth? Take a look at our free research report of analyst consensus for HNI’s outlook.
- Financial Health: Are HNI’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 29 December 2018. This may not be consistent with full year annual report figures.
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