When Dover Corporation (NYSE:DOV) released its most recent earnings update (30 September 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Dover performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see DOV has performed.
Despite a decline, did DOV underperform the long-term trend and the industry?
DOV's trailing twelve-month earnings (from 30 September 2019) of US$668m has declined by -7.6% 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 -1.0%, indicating the rate at which DOV is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, Dover has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.1% exceeds the US Machinery industry of 7.4%, indicating Dover has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Dover’s debt level, has increased over the past 3 years from 11% to 15%.
What does this mean?
Though Dover's past data is helpful, it is only one aspect of my investment thesis. Usually companies that endure a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry growth and disruption. I suggest you continue to research Dover to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DOV’s future growth? Take a look at our free research report of analyst consensus for DOV’s outlook.
- Financial Health: Are DOV’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 30 September 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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