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Does American Woodmark Corporation's (NASDAQ:AMWD) 31% Earnings Growth Reflect The Long-Term Trend?

Simply Wall St

Examining American Woodmark Corporation's (NASDAQ:AMWD) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess AMWD's latest performance announced on 31 July 2019 and weight these figures against its longer term trend and industry movements.

See our latest analysis for American Woodmark

Did AMWD beat its long-term earnings growth trend and its industry?

AMWD's trailing twelve-month earnings (from 31 July 2019) of US$86m has jumped 31% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 18%, indicating the rate at which AMWD is growing has accelerated. What's enabled this growth? Well, let’s take a look at if it is merely owing to an industry uplift, or if American Woodmark has seen some company-specific growth.

NasdaqGS:AMWD Income Statement, September 20th 2019

In terms of returns from investment, American Woodmark has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 7.4% is below the US Building industry of 8.1%, 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 26% to 10%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 10% to 99% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as American Woodmark gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research American Woodmark to get a better picture 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 July 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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. Thank you for reading.