Measuring Campbell Soup Company’s (NYSE:CPB) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess CPB’s recent performance announced on 29 April 2018 and compare these figures to its historical trend and industry movements.
How Well Did CPB Perform?CPB’s trailing twelve-month earnings (from 29 April 2018) of US$485.00m has declined by -0.63% 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 -0.73%, indicating the rate at which CPB is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and if the whole industry is feeling the heat.
Revenue growth in the past few years, has been positive, however earnings growth has been declining. This means Campbell Soup has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the US food industry has been growing, albeit, at a subdued single-digit rate of 6.50% over the previous twelve months, and 7.91% over the past half a decade. This growth is a median of profitable companies of 25 Food companies in US including Greencore Group, Greencore Group and Bunge. This shows that whatever tailwind the industry is deriving benefit from, Campbell Soup has not been able to leverage it as much as its industry peers.In terms of returns from investment, Campbell Soup has invested its equity funds well leading to a 34.37% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 4.20% is below the US Food industry of 6.67%, indicating Campbell Soup’s are utilized less efficiently. Furthermore, its return on capital (ROC), which also accounts for Campbell Soup’s debt level, has declined over the past 3 years from 21.70% to 13.36%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 330.22% to 697.59% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Generally companies that endure a drawn out period of decline in earnings are going through some sort of reinvestment phase in order to keep up with the latest industry disruption and expansion. I suggest you continue to research Campbell Soup to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CPB’s future growth? Take a look at our free research report of analyst consensus for CPB’s outlook.
- Financial Health: Is CPB’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.
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.