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Does American Woodmark Corporation’s (NASDAQ:AMWD) Past Performance Indicate A Weaker Future?

Mercedes Harden

When American Woodmark Corporation (NASDAQ:AMWD) released its most recent earnings update (31 October 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were American Woodmark’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not AMWD actually performed well. Below is a quick commentary on how I see AMWD has performed.

Check out our latest analysis for American Woodmark

Was AMWD weak performance lately part of a long-term decline?

AMWD’s trailing twelve-month earnings (from 31 October 2018) of US$64m has declined by -13% 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 23%, indicating the rate at which AMWD is growing has slowed down. Why could this be happening? Let’s examine what’s transpiring with margins and whether the rest of the industry is feeling the heat.

NasdaqGS:AMWD Income Statement Export January 1st 19

In terms of returns from investment, American Woodmark has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. Furthermore, its return on assets (ROA) of 6.1% is below the US Building industry of 8.7%, indicating American Woodmark’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for American Woodmark’s debt level, has declined over the past 3 years from 23% to 10%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 14% to 117% over the past 5 years.

What does this mean?

Though American Woodmark’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I recommend you continue to research American Woodmark to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AMWD’s future growth? Take a look at our free research report of analyst consensus for AMWD’s outlook.
  2. Financial Health: Are AMWD’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 31 October 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.