Does Ruth’s Hospitality Group, Inc.’s (NASDAQ:RUTH) 38% Earnings Growth Reflect The Long-Term Trend?

Assessing Ruth’s Hospitality Group, Inc.’s (NASDAQ:RUTH) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess RUTH’s recent performance announced on 30 December 2018 and evaluate these figures to its long-term trend and industry movements.

See our latest analysis for Ruth’s Hospitality Group

How Well Did RUTH Perform?

RUTH’s trailing twelve-month earnings (from 30 December 2018) of US$42m has jumped 38% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.3%, indicating the rate at which RUTH is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is only a result of industry tailwinds, or if Ruth’s Hospitality Group has seen some company-specific growth.

NasdaqGS:RUTH Income Statement, April 5th 2019
NasdaqGS:RUTH Income Statement, April 5th 2019

In terms of returns from investment, Ruth’s Hospitality Group has invested its equity funds well leading to a 46% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 17% exceeds the US Hospitality industry of 6.7%, indicating Ruth’s Hospitality Group has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Ruth’s Hospitality Group’s debt level, has declined over the past 3 years from 37% to 33%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 19% to 45% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. 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 Ruth’s Hospitality Group to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for RUTH’s future growth? Take a look at our free research report of analyst consensus for RUTH’s outlook.
  2. Financial Health: Are RUTH’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 30 December 2018. 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 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. Thank you for reading.