Examining how Darden Restaurants, Inc. (NYSE:DRI) is performing as a company requires looking at more than just a years’ earnings. Below, I will run you through a simple sense check to build perspective on how Darden Restaurants is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its hospitality industry peers.
Commentary On DRI’s Past Performance
DRI’s trailing twelve-month earnings (from 25 November 2018) of US$679m has jumped 35% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 33%, indicating the rate at which DRI is growing has accelerated. How has it been able to do this? Let’s see whether it is solely because of industry tailwinds, or if Darden Restaurants has seen some company-specific growth.
In terms of returns from investment, Darden Restaurants has invested its equity funds well leading to a 30% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the US Hospitality industry of 7.7%, indicating Darden Restaurants has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Darden Restaurants’s debt level, has increased over the past 3 years from 17% to 20%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 139% to 43% over the past 5 years.
What does this mean?
Though Darden Restaurants’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Darden Restaurants gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Darden Restaurants to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DRI’s future growth? Take a look at our free research report of analyst consensus for DRI’s outlook.
- Financial Health: Are DRI’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 25 November 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 firstname.lastname@example.org.