Examining Graham Holdings Company's (NYSE:GHC) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess GHC's latest performance announced on 31 December 2019 and weigh these figures against its longer term trend and industry movements.
How GHC fared against its long-term earnings performance and its industry
GHC's trailing twelve-month earnings (from 31 December 2019) of US$326m has jumped 21% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 1.8%, indicating the rate at which GHC is growing has accelerated. What's enabled this growth? Let's see if it is merely because of an industry uplift, or if Graham Holdings has seen some company-specific growth.
In terms of returns from investment, Graham Holdings has fallen short of achieving a 20% return on equity (ROE), recording 9.8% instead. However, its return on assets (ROA) of 5.9% exceeds the US Consumer Services industry of 5.3%, indicating Graham Holdings has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Graham Holdings’s debt level, has declined over the past 3 years from 8.4% to 6.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 14% to 17% over the past 5 years.
What does this mean?
Though Graham Holdings's past data is helpful, it is only one aspect of my investment thesis. While Graham Holdings has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Graham Holdings to get a better picture of the stock by looking at:
- Financial Health: Are GHC’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.
- Valuation: What is GHC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GHC is currently mispriced by the market.
- 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 December 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 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.
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