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Where Brown-Forman Corporation (NYSE:BF.B) Stands In Terms Of Earnings Growth Against Its Industry

Simply Wall St

For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Brown-Forman Corporation (NYSE:BF.B) useful as an attempt to give more color around how Brown-Forman is currently performing.

Check out our latest analysis for Brown-Forman

How BF.B fared against its long-term earnings performance and its industry

BF.B's trailing twelve-month earnings (from 31 October 2019) of US$854m has jumped 14% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 1.6%, indicating the rate at which BF.B is growing has accelerated. How has it been able to do this? Let's take a look at if it is merely a result of industry tailwinds, or if Brown-Forman has experienced some company-specific growth.

NYSE:BF.B Income Statement, February 17th 2020

In terms of returns from investment, Brown-Forman has invested its equity funds well leading to a 44% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 17% exceeds the US Beverage industry of 11%, indicating Brown-Forman has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Brown-Forman’s debt level, has declined over the past 3 years from 27% to 23%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 54% to 126% over the past 5 years.

What does this mean?

Though Brown-Forman's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Brown-Forman gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Brown-Forman to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for BF.B’s future growth? Take a look at our free research report of analyst consensus for BF.B’s outlook.
  2. Financial Health: Are BF.B’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.
  3. 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 editorial-team@simplywallst.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.

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. Thank you for reading.