With A -15% Earnings Drop, Did The Hackett Group, Inc. (NASDAQ:HCKT) Really Underperform?

After looking at The Hackett Group, Inc.’s (NasdaqGS:HCKT) latest earnings announcement (27 December 2019), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 a crucial aspect. Below is a brief commentary on my key takeaways.

View our latest analysis for Hackett Group

Commentary On HCKT’s Past Performance

HCKT’s trailing twelve-month earnings (from 27 December 2019) of US$23m has declined by -15% 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 16%, indicating the rate at which HCKT is growing has slowed down. Why could this be happening? Well, let’s look at what’s occurring with margins and if the rest of the industry is facing the same headwind.

NasdaqGS:HCKT Income Statement, March 10th 2020
NasdaqGS:HCKT Income Statement, March 10th 2020

In terms of returns from investment, Hackett Group has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 12% exceeds the US IT industry of 6.9%, indicating Hackett Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Hackett Group’s debt level, has declined over the past 3 years from 33% to 24%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. You should continue to research Hackett Group to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for HCKT’s future growth? Take a look at our free research report of analyst consensus for HCKT’s outlook.
  2. Financial Health: Are HCKT’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 27 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 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.

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