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When Central Garden & Pet Company (NASDAQ:CENT) announced its most recent earnings (30 March 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Central Garden & Pet has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see CENT has performed.
Was CENT's recent earnings decline indicative of a tough track record?
CENT's trailing twelve-month earnings (from 30 March 2019) of US$96m has declined by -11% 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 44%, indicating the rate at which CENT is growing has slowed down. Why could this be happening? Well, let's look at what's transpiring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Central Garden & Pet has fallen short of achieving a 20% return on equity (ROE), recording 9.6% instead. Furthermore, its return on assets (ROA) of 6.4% is below the US Household Products industry of 8.3%, indicating Central Garden & Pet's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Central Garden & Pet’s debt level, has declined over the past 3 years from 11% to 8.8%.
What does this mean?
Though Central Garden & Pet's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I recommend you continue to research Central Garden & Pet to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CENT’s future growth? Take a look at our free research report of analyst consensus for CENT’s outlook.
- Financial Health: Are CENT’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 30 March 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 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.