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How Does American Woodmark Corporation's (NASDAQ:AMWD) Earnings Growth Stack Up Against The Industry?

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For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on American Woodmark Corporation (NasdaqGS:AMWD) useful as an attempt to give more color around how American Woodmark is currently performing.

See our latest analysis for American Woodmark

Did AMWD's recent earnings growth beat the long-term trend and the industry?

AMWD's trailing twelve-month earnings (from 31 January 2020) of US$84m has increased by 3.8% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 14%, indicating the rate at which AMWD is growing has slowed down. What could be happening here? Well, let’s take a look at what’s occurring with margins and if the whole industry is experiencing the hit as well.

NasdaqGS:AMWD Income Statement April 17th 2020
NasdaqGS:AMWD Income Statement April 17th 2020

In terms of returns from investment, American Woodmark has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 7.2% is below the US Building industry of 7.9%, 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 9.0% to 87% over the past 5 years.

What does this mean?

American Woodmark's track record can be a valuable insight into its earnings performance, but it certainly 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 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 January 2020. This may not be consistent with full year annual report figures.

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.

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. Thank you for reading.