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Does Diploma PLC's (LON:DPLM) Recent Track Record Look Strong?

Simply Wall St

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 Diploma PLC (LSE:DPLM) useful as an attempt to give more color around how Diploma is currently performing.

See our latest analysis for Diploma

How Well Did DPLM Perform?

DPLM's trailing twelve-month earnings (from 31 March 2020) of UK£63m has increased by 9.3% 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 13%, indicating the rate at which DPLM is growing has slowed down. What could be happening here? Well, let's examine what's transpiring with margins and whether the rest of the industry is facing the same headwind.

LSE:DPLM Income Statement May 25th 2020

In terms of returns from investment, Diploma has fallen short of achieving a 20% return on equity (ROE), recording 20% instead. However, its return on assets (ROA) of 12% exceeds the GB Trade Distributors industry of 7.3%, indicating Diploma has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Diploma’s debt level, has declined over the past 3 years from 23% to 20%.

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 Diploma gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Diploma to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for DPLM’s future growth? Take a look at our free research report of analyst consensus for DPLM’s outlook.
  2. Financial Health: Are DPLM’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 March 2020. This may not be consistent with full year annual report figures.

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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Thank you for reading.