When Hormel Foods Corporation’s (NYSE:HRL) announced its latest earnings (27 October 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Hormel Foods’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not HRL actually performed well. Below is a quick commentary on how I see HRL has performed.
Did HRL perform worse than its track record and industry?
HRL’s trailing twelve-month earnings (from 27 October 2019) of US$979m has declined by -3.2% 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 9.5%, indicating the rate at which HRL is growing has slowed down. Why is this? Well, let’s take a look at what’s going on with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, Hormel Foods 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 Food industry of 6.1%, indicating Hormel Foods has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Hormel Foods’s debt level, has declined over the past 3 years from 24% to 16%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I suggest you continue to research Hormel Foods to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HRL’s future growth? Take a look at our free research report of analyst consensus for HRL’s outlook.
- Financial Health: Are HRL’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 27 October 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 email@example.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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