In this article, I will take a look at Horace Mann Educators Corporation’s (NYSE:HMN) most recent earnings update (30 June 2018) and compare these latest figures against its performance over the past few years, along with how the rest of HMN’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Could HMN beat the long-term trend and outperform its industry?
HMN’s trailing twelve-month earnings (from 30 June 2018) of US$178.0m has more than doubled from US$83.8m in the prior year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.2%, indicating the rate at which HMN is growing has accelerated. What’s enabled this growth? Let’s see whether it is merely owing to an industry uplift, or if Horace Mann Educators has seen some company-specific growth.
In the past couple of years, Horace Mann Educators increased its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time.
Looking at growth from a sector-level, the US insurance industry has been growing its average earnings by double-digit 10.1% in the prior twelve months, and a more muted 6.7% over the past five. This growth is a median of profitable companies of 25 Insurance companies in US including ACMAT, Heritage Insurance Holdings and Everest Re Group. This shows that any tailwind the industry is enjoying, Horace Mann Educators is able to leverage this to its advantage.
In terms of returns from investment, Horace Mann Educators has fallen short of achieving a 20% return on equity (ROE), recording 13.2% instead. Furthermore, its return on assets (ROA) of 1.7% is below the US Insurance industry of 2.0%, indicating Horace Mann Educators’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Horace Mann Educators’s debt level, has declined over the past 3 years from 1.6% to 1.0%.
What does this mean?
Horace Mann Educators’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Horace Mann Educators has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Horace Mann Educators to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HMN’s future growth? Take a look at our free research report of analyst consensus for HMN’s outlook.
- Financial Health: Are HMN’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 30 June 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.