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 Helen of Troy Limited’s (NASDAQ:HELE) 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 Helen of Troy
How HELE fared against its long-term earnings performance and its industry
For the purpose of this commentary, I like to use data from the most recent 12 months, 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 blend enables me to assess different stocks on a similar basis, using the latest information. For Helen of Troy, its most recent trailing-twelve-month earnings is $108.1M, which, relative to the prior year’s level, has increased by a somewhat soft 4.20%. Given that these figures may be somewhat short-term thinking, I have estimated an annualized five-year figure for Helen of Troy’s net income, which stands at $110.0M. This means even though earnings increased from last year’s level, over the longer term, Helen of Troy’s earnings have been deteriorating on average.
What could be happening here? Well, let’s look at what’s occurring with margins and whether the entire industry is experiencing the hit as well. Revenue growth in the last couple of years, has been positive, however, earnings growth has not been able to catch up, meaning Helen of Troy has been increasing its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the US consumer durables industry has been growing its average earnings by double-digit 11.28% in the prior year, and 14.75% over the previous five years. This means whatever uplift the industry is enjoying, Helen of Troy has not been able to reap as much as its industry peers.
What does this mean?
Helen of Troy’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be factors that are impacting the industry as a whole, thus the high industry growth rate over the same time frame. You should continue to research Helen of Troy to get a more holistic view of the stock by looking at: