After looking at Fortune Brands Home & Security Inc’s (NYSE:FBHS) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. See our latest analysis for FBHS

Did FBHS’s recent EPS Growth beat the long-term trend and the industry?

For the most up-to-date info, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to analyze different stocks on a similar basis, using the most relevant data points. Fortune Brands Home & Security’s latest earnings is $452M, which compared to the previous year’s level, has jumped up by 14.16%. Given that these figures may be fairly nearsighted, I have determined an annualized five-year value for FBHS’s net income, which stands at $213M. This shows that, generally, Fortune Brands Home & Security has been able to consistently improve its profits over the last couple of years as well.

What’s the driver of this growth? Let’s see if it is only owing to an industry uplift, or if Fortune Brands Home & Security has experienced some company-specific growth. In the last couple of years, Fortune Brands Home & Security increased its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the US building products industry has been growing its average earnings by double-digit 12.29% over the prior year, and 29.25% over the past five. This means that whatever tailwind the industry is enjoying, Fortune Brands Home & Security is able to leverage this to its advantage.

What does this mean?

Though Fortune Brands Home & Security’s past data is helpful, it is only one aspect of my investment thesis. While Fortune Brands Home & Security 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 Fortune Brands Home & Security to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for FBHS’s future growth? Take a look at our free research report of analyst consensus for FBHS’s outlook.

2. Financial Health: Is FBHS’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.

3. 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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.
To help readers see pass 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.