For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Hibbett Sports, Inc. (NASDAQ:HIBB) useful as an attempt to give more color around how Hibbett Sports is currently performing.
Did HIBB perform worse than its track record and industry?
HIBB’s trailing twelve-month earnings (from 03 November 2018) of US$32m has declined by -15% 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 -15%, indicating the rate at which HIBB is growing has slowed down. Why is this? Well, let’s look at what’s going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Hibbett Sports has fallen short of achieving a 20% return on equity (ROE), recording 9.6% instead. Furthermore, its return on assets (ROA) of 6.1% is below the US Specialty Retail industry of 7.4%, indicating Hibbett Sports’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Hibbett Sports’s debt level, has declined over the past 3 years from 35% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.9% to 7.8% over the past 5 years.
What does this mean?
Hibbett Sports’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that experience an extended period of reduction in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry growth and disruption. You should continue to research Hibbett Sports to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HIBB’s future growth? Take a look at our free research report of analyst consensus for HIBB’s outlook.
- Financial Health: Are HIBB’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 03 November 2018. This may not be consistent with full year annual report figures.
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.