When The Hershey Company (NYSE:HSY) released its most recent earnings update (01 April 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Hershey has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see HSY has performed. View out our latest analysis for Hershey
Commentary On HSY’s Past PerformanceHSY’s trailing twelve-month earnings (from 01 April 2018) of US$1.01b has jumped 63.55% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 1.45%, indicating the rate at which HSY is growing has accelerated. How has it been able to do this? Let’s see if it is solely attributable to industry tailwinds, or if Hershey has experienced some company-specific growth.
The rise in earnings seems to be propelled by a solid top-line increase outpacing its growth rate of costs. Though this resulted in a margin contraction, it has made Hershey more profitable. Eyeballing growth from a sector-level, the US food industry has been growing, albeit, at a unexciting single-digit rate of 7.22% over the prior year, and 7.89% over the previous five years. This growth is a median of profitable companies of 25 Food companies in US including Greencore Group, Greencore Group and Bunge. This means whatever uplift the industry is deriving benefit from, Hershey is capable of leveraging this to its advantage.In terms of returns from investment, Hershey has invested its equity funds well leading to a 101.96% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15.17% exceeds the US Food industry of 6.60%, indicating Hershey has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Hershey’s debt level, has increased over the past 3 years from 37.79% to 42.16%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Hershey gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Hershey to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HSY’s future growth? Take a look at our free research report of analyst consensus for HSY’s outlook.
- Financial Health: Is HSY’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.