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After looking at Duluth Holdings Inc.'s (NasdaqGS:DLTH) latest earnings update (02 February 2020), I found it helpful to revisit the company's performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Despite a decline, did DLTH underperform the long-term trend and the industry?
DLTH's trailing twelve-month earnings (from 02 February 2020) of US$19m has declined by -18% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 3.7%, indicating the rate at which DLTH is growing has slowed down. What could be happening here? Let's examine what's going on with margins and if the whole industry is experiencing the hit as well.
In terms of returns from investment, Duluth Holdings has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 4.9% is below the US Online Retail industry of 5.1%, indicating Duluth Holdings's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Duluth Holdings’s debt level, has declined over the past 3 years from 29% to 7.1%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 15% to 38% over the past 5 years.
What does this mean?
Duluth Holdings's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that are profitable, but have capricious earnings, can have many factors influencing its business. You should continue to research Duluth Holdings to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for DLTH’s future growth? Take a look at our free research report of analyst consensus for DLTH’s outlook.
Financial Health: Are DLTH’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 02 February 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 email@example.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.
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