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For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at JB Hi-Fi Limited’s (ASX:JBH) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for JB Hi-Fi

Were JBH’s earnings stronger than its past performances and the industry?

For the most up-to-date info, I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This technique allows me to examine many different companies on a similar basis, using the latest information. For JB Hi-Fi, its latest earnings (trailing twelve month) is AU$213.70M, which, against the previous year’s figure, has climbed up by 27.66%. Given that these figures may be somewhat myopic, I have computed an annualized five-year figure for JBH’s net income, which stands at AU$134.53M This suggests that, generally, JB Hi-Fi has been able to gradually improve its earnings over the last couple of years as well.

What’s enabled this growth? Let’s take a look at if it is solely owing to an industry uplift, or if JB Hi-Fi has experienced some company-specific growth. The hike in earnings seems to be propelled by a strong top-line increase outstripping its growth rate of costs. Though this brought about a margin contraction, it has made JB Hi-Fi more profitable. Inspecting growth from a sector-level, the Australian specialty retail industry has been growing, albeit, at a subdued single-digit rate of 6.93% over the previous twelve months, and 5.76% over the past five. This means whatever tailwind the industry is enjoying, JB Hi-Fi is capable of leveraging this to its advantage.

What does this mean?

JB Hi-Fi’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research JB Hi-Fi to get a better picture of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for JBH’s future growth? Take a look at our free research report of analyst consensus for JBH’s outlook.

• 2. Financial Health: Is JBH’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.

• 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 31 December 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.