After reading Calavo Growers, Inc.'s (NasdaqGS:CVGW) latest earnings update (31 October 2019), 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 CVGW has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Were CVGW's earnings stronger than its past performances and the industry?
CVGW's trailing twelve-month earnings (from 31 October 2019) of US$37m has jumped 14% 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 16%, indicating the rate at which CVGW is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Calavo Growers has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 8.9% exceeds the US Food industry of 6.2%, indicating Calavo Growers has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Calavo Growers’s debt level, has declined over the past 3 years from 28% to 23%.
What does this mean?
Calavo Growers's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as Calavo Growers gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Calavo Growers to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CVGW’s future growth? Take a look at our free research report of analyst consensus for CVGW’s outlook.
- Financial Health: Are CVGW’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 October 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 email@example.com. 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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