Assessing AMCON Distributing Company’s (NYSEMKT:DIT) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess DIT’s recent performance announced on 31 March 2018 and evaluate these figures to its longer term trend and industry movements. Check out our latest analysis for AMCON Distributing
Was DIT’s weak performance lately a part of a long-term decline?
DIT’s trailing twelve-month earnings (from 31 March 2018) of US$3.23m has declined by -34.69% 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 -9.47%, indicating the rate at which DIT is growing has slowed down. Why could this be happening? Let’s examine what’s occurring with margins and if the whole industry is facing the same headwind.
Revenue growth over the past few years, has been positive, yet earnings growth has been deteriorating. This implies that AMCON Distributing has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the US retail distributors industry has been growing, albeit, at a muted single-digit rate of 4.65% over the prior twelve months, and a flatter 1.45% over the past five years. This means that any near-term headwind the industry is experiencing, it’s hitting AMCON Distributing harder than its peers.
In terms of returns from investment, AMCON Distributing has not invested its equity funds well, leading to a 4.61% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.17% is below the US Retail Distributors industry of 5.99%, indicating AMCON Distributing’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for AMCON Distributing’s debt level, has declined over the past 3 years from 9.35% to 4.10%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 44.55% to 47.63% over the past 5 years.
What does this mean?
AMCON Distributing’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. In some cases, companies that endure a prolonged period of decline in earnings are undergoing some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a signal of a structural shift, which makes AMCON Distributing and its peers a higher risk investment. I recommend you continue to research AMCON Distributing to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DIT’s future growth? Take a look at our free research report of analyst consensus for DIT’s outlook.
- Financial Health: Is DIT’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 2018. 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.