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After looking at PVH Corp.'s (NYSE:PVH) latest earnings update (03 February 2019), I found it helpful to revisit the company's performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Did PVH's recent earnings growth beat the long-term trend and the industry?
PVH's trailing twelve-month earnings (from 03 February 2019) of US$746m has jumped 39% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 16%, indicating the rate at which PVH is growing has accelerated. What's the driver of this growth? Let's take a look at if it is merely a result of an industry uplift, or if PVH has seen some company-specific growth.
In terms of returns from investment, PVH has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 7.3% is below the US Luxury industry of 8.7%, indicating PVH's are utilized less efficiently. However, its return on capital (ROC), which also accounts for PVH’s debt level, has increased over the past 3 years from 9.2% to 9.2%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 92% to 49% over the past 5 years.
What does this mean?
Though PVH's past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research PVH to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PVH’s future growth? Take a look at our free research report of analyst consensus for PVH’s outlook.
- Financial Health: Are PVH’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 03 February 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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. Thank you for reading.