By Rob Otman
Hormel (NYSE: HRL) is a large cap company that operates within the food products industry. Its market cap is $18 billion today, and the total one-year return is -4.77% for shareholders.
Hormel stock is underperforming the market. It’s beaten down, but it reports earnings soon. So is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.
Our system looks at six key metrics…
✗ Earnings-per-Share (EPS) Growth: Hormel reported a recent EPS growth rate of -5.41%. That’s below the food products industry average of 18.09%. That’s not a good sign. We like to see companies that have higher earnings growth.
✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the food products industry is 27.01. And Hormel’s ratio comes in at 20.09. It’s trading at a better value than many of its competitors.
✓ Debt-to-Equity: The debt-to-equity ratio for Hormel stock is 5.26%. That’s below the food products industry average of 76.62%. The company is less leveraged.
✗ Free Cash Flow per Share Growth: Hormel’s FCF has been lower than that of its competitors over the last year. That’s not good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.
✗ Profit Margins: The profit margin of Hormel comes in at 8.27% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Hormel’s profit margin is below the food products average of 9.32%. So that’s a negative indicator for investors.
✓ Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Hormel is 19.09%, and that’s above its industry average ROE of 19.06%.
Hormel stock passes three of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Hold.
Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.
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Source:: Investment You