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Today I will take a look at Hormel Foods Corporation’s (NYSE:HRL) most recent earnings update (28 April 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the food industry performed. As an investor, I find it beneficial to assess HRL’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.
Did HRL beat its long-term earnings growth trend and its industry?
HRL’s trailing twelve-month earnings (from 28 April 2019) of US$996m has increased by 5.8% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 11%, indicating the rate at which HRL is growing has slowed down. What could be happening here? Well, let’s look at what’s going on with margins and if the rest of the industry is experiencing the hit as well.
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 13% exceeds the US Food industry of 5.8%, 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 23% to 17%.
What does this mean?
Hormel Foods’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as Hormel Foods gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Hormel Foods to get a more holistic view 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 28 April 2019. 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 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. Thank you for reading.