Measuring Graham Holdings Company’s (NYSE:GHC) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess GHC’s recent performance announced on 31 December 2018 and weigh these figures against its long-term trend and industry movements.
Despite a decline, did GHC underperform the long-term trend and the industry?
GHC’s trailing twelve-month earnings (from 31 December 2018) of US$270m has declined by -9.9% 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 -8.4%, indicating the rate at which GHC is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Graham Holdings has fallen short of achieving a 20% return on equity (ROE), recording 9.3% instead. However, its return on assets (ROA) of 6.3% exceeds the US Consumer Services industry of 5.4%, indicating Graham Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Graham Holdings’s debt level, has increased over the past 3 years from 5.5% to 9.5%.
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 affecting its business. I recommend you continue to research Graham Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GHC’s future growth? Take a look at our free research report of analyst consensus for GHC’s outlook.
- 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.
- 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.
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