In this commentary, I will examine Headlam Group plc’s (LSE:HEAD) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the retail distributors industry performed. As an investor, I find it beneficial to assess HEAD’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Headlam Group
Could HEAD beat the long-term trend and outperform its industry?
For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique allows me to examine many different companies on a more comparable basis, using the latest information. “For Headlam Group, its “, latest twelve-month earnings is £32.5M, which, in comparison to last year’s level, has grown by a somewhat unexciting 6.16%. Since these figures may be relatively short-term thinking, I’ve created an annualized five-year figure for Headlam Group’s earnings, which stands at £23.1M. This means generally, Headlam Group has been able to gradually raise its earnings over the last few years as well.
What’s enabled this growth? Well, let’s take a look at if it is merely attributable to industry tailwinds, or if Headlam Group has seen some company-specific growth. In the last couple of years, Headlam Group grew its bottom line faster than revenue by efficiently controlling its costs. This has led to a margin expansion and profitability over time. Eyeballing growth from a sector-level, the UK retail distributors industry has been growing its average earnings by double-digit 11.87% in the past twelve months, . This is a turnaround from a volatile drop of -2.36% in the past couple of years. This shows that, in the recent industry expansion, Headlam Group has not been able to reap as much as its average peer.
What does this mean?
Headlam Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Headlam Group has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Headlam Group to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for HEAD’s future growth? Take a look at our free research report of analyst consensus for HEAD’s outlook.