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Strategies & Market Trends : Young and Older Folk Portfolio -- Ignore unavailable to you. Want to Upgrade?

To: QTI on SI who wrote (23802)	12/21/2025 12:07:33 PM
From: SeeksQuality	6 Recommendations Recommended By Chairo Kiisu Ichiro chowder eaglebear LCES MikeAzu and 1 more member Read Replies (1) \| Respond to of 23843

Re: “Will this still have done its job five years from now?” Excellent analysis of what it is and isn't, with a minor quibble on this last line. The next five years may be different from the last three years, thus it leaves us guessing at key questions: * Will the operating environment improve from recent history? The last few years have been marked by elevated inflation, in particular, which might improve (or might not). * Are these companies priced more reasonably than they were three years ago? If so, then P/E compression (which is usually at least part of the equation) may ease. * Is the company adapting to the continuing challenges and prepared to resume growth again? This isn't precisely a criticism of what you are doing, just a reminder to all that any analysis based on past numbers may not be predictive of the future. (Once upon a time SSD included similar cautionary language prominently with its valuation models. They've done a great job of clarifying what their analysis reflects but have removed that language.) A lot of these models are based on five-year average P/E (or sometimes five-year average yield). But if the last five years have been historically wonky, then such results will be unreliable. In the case of HRL they delivered exceptional growth from 2009-2016, averaging 14.6% annual EPS growth over that seven year span. Now they are mired in a nine-year span (2017-2025) with overall negative EPS growth (a -2.0% annual decline). The shares of course have declined even more than that, because the P/E has compressed from 22x to 17x at the same time that the earnings have been sliding. Now the hope is that they can get things moving in the right direction again, with projections for 6%-7% growth going forward and a quarterly earnings that offered some hope that they've turned the corner. (Maybe, maybe not, we've heard that story before.) It all comes down to whether you believe in their projections or not. You could make a case that they are finally fairly valued, a P/E ratio that they haven't seen since 2013 (and back then they were an excellent investment). You could also make a case that a decade of struggling to maintain margins and grow earnings casts doubt on their ability to do so going forward. Caveat emptor!