Understanding how Ingredion Incorporated (NYSE:INGR) 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 Ingredion is doing by comparing its latest earnings with its long-term trend as well as the performance of its food industry peers.
Was INGR's weak performance lately a part of a long-term decline?
INGR's trailing twelve-month earnings (from 31 December 2019) of US$413m has declined by -6.8% 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 2.4%, indicating the rate at which INGR is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Ingredion has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 8.1% exceeds the US Food industry of 6.0%, indicating Ingredion has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Ingredion’s debt level, has declined over the past 3 years from 17% to 14%.
What does this mean?
Though Ingredion's past data is helpful, it is only one aspect of my investment thesis. Generally companies that experience an extended period of reduction in earnings are going through some sort of reinvestment phase Though if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes Ingredion and its peers a higher risk investment. I suggest you continue to research Ingredion to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for INGR’s future growth? Take a look at our free research report of analyst consensus for INGR’s outlook.
- Financial Health: Are INGR’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 31 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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