Yahoo Finance Home Capital Group Inc (TSE:HCG): Did It Outperform The Industry?
When Home Capital Group Inc (TSE:HCG) released its most recent earnings update (30 June 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Home Capital Group has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see HCG has performed.
See our latest analysis for Home Capital Group
Did HCG beat its long-term earnings growth trend and its industry?
HCG’s trailing twelve-month earnings (from 30 June 2018) of CA$124.8m has jumped 95.5% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -7.8%, indicating the rate at which HCG is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is solely attributable to an industry uplift, or if Home Capital Group has seen some company-specific growth.
Over the last few years, Home Capital Group top-line expansion has outstripped earnings and the growth rate of expenses. Though this brought about a margin contraction, it has moderated Home Capital Group’s earnings contraction.
Viewing growth from a sector-level, the Canadian mortgage industry has been growing its average earnings by double-digit 13.4% in the prior twelve months, and 11.6% over the past five years. This growth is a median of profitable companies of 9 Mortgage companies in CA including Timbercreek Financial, Equitable Group and Genworth MI Canada. This means that whatever tailwind the industry is deriving benefit from, Home Capital Group is able to leverage this to its advantage.
In terms of returns from investment, Home Capital Group has fallen short of achieving a 20% return on equity (ROE), recording 6.6% instead. Furthermore, its return on assets (ROA) of 0.7% is below the CA Mortgage industry of 1.9%, indicating Home Capital Group’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Home Capital Group’s debt level, has declined over the past 3 years from 7.8% to 3.3%.
What does this mean?
Home Capital Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There may be factors that are influencing the industry as a whole, hence the high industry growth rate over the same time period. I suggest you continue to research Home Capital Group to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for HCG’s future growth? Take a look at our free research report of analyst consensus for HCG’s outlook.
Financial Health: Are HCG’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 30 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 editorial-team@simplywallst.com.
