Today I will take a look at Douglas Dynamics, Inc.'s (NYSE:PLOW) most recent earnings update (31 March 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the machinery industry performed. As an investor, I find it beneficial to assess PLOW’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.
How Well Did PLOW Perform?
PLOW's trailing twelve-month earnings (from 31 March 2019) of US$45m has declined by -20% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 11%, indicating the rate at which PLOW is growing has slowed down. Why is this? Let's examine what's transpiring with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Douglas Dynamics has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 9.2% exceeds the US Machinery industry of 7.7%, indicating Douglas Dynamics has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Douglas Dynamics’s debt level, has declined over the past 3 years from 16% to 12%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 72% to 99% over the past 5 years.
What does this mean?
Douglas Dynamics's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I suggest you continue to research Douglas Dynamics to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PLOW’s future growth? Take a look at our free research report of analyst consensus for PLOW’s outlook.
- Financial Health: Are PLOW’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 31 March 2019. This may not be consistent with full year annual report figures.
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