Assessing Sonoco Products Company’s (NYSE:SON) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess SON’s recent performance announced on 31 December 2019 and evaluate these figures to its long-term trend and industry movements.
Despite a decline, did SON underperform the long-term trend and the industry?
SON’s trailing twelve-month earnings (from 31 December 2019) of US$292m has declined by -6.9% 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 4.5%, indicating the rate at which SON is growing has slowed down. Why is this? Let’s examine what’s going on with margins and if the rest of the industry is facing the same headwind.
In terms of returns from investment, Sonoco Products has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 6.9% exceeds the US Packaging industry of 5.5%, indicating Sonoco Products has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Sonoco Products’s debt level, has declined over the past 3 years from 14% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 83% to 91% over the past 5 years.
What does this mean?
Though Sonoco Products’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. You should continue to research Sonoco Products to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SON’s future growth? Take a look at our free research report of analyst consensus for SON’s outlook.
- Financial Health: Are SON’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 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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