After reading Harris Corporation’s (NYSE:HRS) latest earnings update (29 June 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether HRS has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Did HRS beat its long-term earnings growth trend and its industry?
HRS’s trailing twelve-month earnings (from 29 June 2018) of US$721.00m has jumped 13.41% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 3.32%, indicating the rate at which HRS is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at if it is solely owing to industry tailwinds, or if Harris has experienced some company-specific growth.
In the last few years, Harris increased its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Inspecting growth from a sector-level, the US aerospace & defense industry has been growing, albeit, at a unexciting single-digit rate of 6.21% over the previous year, and 3.75% over the previous five years. This growth is a median of profitable companies of 25 Aerospace & Defense companies in US including Butler National, Mikros Systems and Aerojet Rocketdyne Holdings. This suggests that any tailwind the industry is gaining from, Harris is able to leverage this to its advantage.
NYSE:HRS Income Statement Export August 12th 18 In terms of returns from investment, Harris has invested its equity funds well leading to a 21.70% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.04% exceeds the US Aerospace & Defense industry of 5.95%, indicating Harris has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Harris’s debt level, has increased over the past 3 years from 6.06% to 11.05%.
What does this mean?
Though Harris’s past data is helpful, it is only one aspect of my investment thesis. While Harris 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 Harris to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HRS’s future growth? Take a look at our free research report of analyst consensus for HRS’s outlook.
- Financial Health: Are HRS’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 29 June 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 email@example.com.
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