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Should You Be Concerned About BMC Stock Holdings Inc’s (NASDAQ:BMCH) Earnings Growth?

Today I will take a look at BMC Stock Holdings Inc’s (NASDAQ:BMCH) most recent earnings update (30 June 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the trade distributors industry performed. As an investor, I find it beneficial to assess BMCH’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.

View our latest analysis for BMC Stock Holdings

How Did BMCH’s Recent Performance Stack Up Against Its Past?

BMCH’s trailing twelve-month earnings (from 30 June 2018) of US$91.85m has more than doubled from US$30.88m in the prior year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 31.09%, indicating the rate at which BMCH is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is merely because of an industry uplift, or if BMC Stock Holdings has seen some company-specific growth.

Over the last couple of years, BMC Stock Holdings expanded its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Scanning growth from a sector-level, the US trade distributors industry has been growing its average earnings by double-digit 37.97% over the past year, and a less exciting 7.39% over the previous five years. This growth is a median of profitable companies of 25 Trade Distributors companies in US including Taiga Building Products, Rexel and Rexel. This means whatever tailwind the industry is gaining from, BMC Stock Holdings is capable of leveraging this to its advantage.

NasdaqGS:BMCH Income Statement Export August 17th 18
NasdaqGS:BMCH Income Statement Export August 17th 18

In terms of returns from investment, BMC Stock Holdings has fallen short of achieving a 20% return on equity (ROE), recording 11.38% instead. However, its return on assets (ROA) of 7.20% exceeds the US Trade Distributors industry of 6.30%, indicating BMC Stock Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for BMC Stock Holdings’s debt level, has increased over the past 3 years from 4.32% to 11.00%.

What does this mean?

Though BMC Stock Holdings’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as BMC Stock Holdings gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research BMC Stock Holdings to get a more holistic view of the stock by looking at:

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

  2. Financial Health: Are BMCH’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 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.

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