For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Green Dot Corporation's (NYSE:GDOT) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
Was GDOT's weak performance lately a part of a long-term decline?
GDOT's trailing twelve-month earnings (from 30 June 2019) of US$118m has declined by -6.5% 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 29%, indicating the rate at which GDOT is growing has slowed down. Why is this? Well, let’s take a look at what’s going on with margins and whether the whole industry is experiencing the hit as well.
In terms of returns from investment, Green Dot has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 4.0% is below the US Consumer Finance industry of 6.1%, indicating Green Dot's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Green Dot’s debt level, has increased over the past 3 years from 6.3% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 0.1% to 0.06% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research Green Dot to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GDOT’s future growth? Take a look at our free research report of analyst consensus for GDOT’s outlook.
- Financial Health: Are GDOT’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 30 June 2019. This may not be consistent with full year annual report figures.
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.
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. Thank you for reading.