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In this commentary, I will examine Hubbell Incorporated’s (NYSE:HUBB) latest earnings update (31 December 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the electrical industry performed. As an investor, I find it beneficial to assess HUBB’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Were HUBB’s earnings stronger than its past performances and the industry?
HUBB’s trailing twelve-month earnings (from 31 December 2018) of US$359m has jumped 48% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -3.3%, indicating the rate at which HUBB is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is solely due to industry tailwinds, or if Hubbell has seen some company-specific growth.
In terms of returns from investment, Hubbell has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.9% exceeds the US Electrical industry of 7.8%, indicating Hubbell has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Hubbell’s debt level, has declined over the past 3 years from 20% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 31% to 100% over the past 5 years.
What does this mean?
Though Hubbell’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 Hubbell to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HUBB’s future growth? Take a look at our free research report of analyst consensus for HUBB’s outlook.
- Financial Health: Are HUBB’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 31 December 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.