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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 Harvey Norman Holdings Limited (ASX:HVN) useful as an attempt to give more color around how Harvey Norman Holdings is currently performing. Check out our latest analysis for Harvey Norman Holdings
Did HVN’s recent earnings growth beat the long-term trend and the industry?
I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to examine different companies on a similar basis, using the latest information. For Harvey Norman Holdings, its most recent earnings (trailing twelve month) is AU$448.98M, which, in comparison to the previous year’s level, has climbed up by 28.79%. Since these figures may be somewhat short-term thinking, I have calculated an annualized five-year figure for HVN’s earnings, which stands at AU$254.16M This means that, on average, Harvey Norman Holdings has been able to consistently improve its earnings over the past couple of years as well.
What’s the driver of this growth? Let’s take a look at if it is only due to an industry uplift, or if Harvey Norman Holdings has experienced some company-specific growth. In the last couple of years, Harvey Norman Holdings expanded its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the Australian multiline retail industry has been growing its average earnings by double-digit 16.28% in the previous twelve months, and a less exciting 6.00% over the past half a decade. This suggests that any uplift the industry is deriving benefit from, Harvey Norman Holdings is capable of leveraging this to its advantage.
What does this mean?
Harvey Norman Holdings’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Harvey Norman Holdings has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Harvey Norman Holdings to get a better picture of the stock by looking at:
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1. Future Outlook: What are well-informed industry analysts predicting for HVN’s future growth? Take a look at our free research report of analyst consensus for HVN’s outlook.
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2. Financial Health: Is HVN’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.
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3. 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 30 June 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.