After reading Dorman Products, Inc.'s (NASDAQ:DORM) latest earnings update (29 December 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether DORM has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Could DORM beat the long-term trend and outperform its industry?
DORM's trailing twelve-month earnings (from 29 December 2018) of US$134m has jumped 25% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.0%, indicating the rate at which DORM is growing has accelerated. What's the driver of this growth? Let's see whether it is only a result of industry tailwinds, or if Dorman Products has experienced some company-specific growth.
In terms of returns from investment, Dorman Products has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 15% exceeds the US Auto Components industry of 7.6%, indicating Dorman Products has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Dorman Products’s debt level, has declined over the past 3 years from 28% to 23%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Dorman Products has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. You should continue to research Dorman Products to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DORM’s future growth? Take a look at our free research report of analyst consensus for DORM’s outlook.
- Financial Health: Are DORM’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 29 December 2018. This may not be consistent with full year annual report figures.
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