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When Hormel Foods Corporation’s (NYSE:HRL) announced its latest earnings (28 October 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Hormel Foods’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not HRL actually performed well. Below is a quick commentary on how I see HRL has performed.
Were HRL’s earnings stronger than its past performances and the industry?
HRL’s trailing twelve-month earnings (from 28 October 2018) of US$1.0b has jumped 19% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 13%, indicating the rate at which HRL is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is solely because of an industry uplift, or if Hormel Foods has experienced some company-specific growth.
In terms of returns from investment, Hormel Foods has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 13% exceeds the US Food industry of 8.1%, indicating Hormel Foods has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Hormel Foods’s debt level, has declined over the past 3 years from 22% to 17%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 7.5% to 11% over the past 5 years.
What does this mean?
Though Hormel Foods’s past data is helpful, it is only one aspect of my investment thesis. While Hormel Foods 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 Hormel Foods to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HRL’s future growth? Take a look at our free research report of analyst consensus for HRL’s outlook.
- Financial Health: Are HRL’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 28 October 2018. This may not be consistent with full year annual report figures.
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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. Thank you for reading.