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In this article, I will take a look at Williams-Sonoma, Inc.'s (NYSE:WSM) most recent earnings update (03 February 2019) and compare these latest figures against its performance over the past few years, along with how the rest of WSM's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Did WSM beat its long-term earnings growth trend and its industry?
WSM's trailing twelve-month earnings (from 03 February 2019) of US$334m has jumped 28% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -0.5%, indicating the rate at which WSM is growing has accelerated. What's the driver of this growth? Well, let’s take a look at whether it is solely because of industry tailwinds, or if Williams-Sonoma has seen some company-specific growth.
In terms of returns from investment, Williams-Sonoma has invested its equity funds well leading to a 29% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 12% exceeds the US Specialty Retail industry of 7.1%, indicating Williams-Sonoma has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Williams-Sonoma’s debt level, has declined over the past 3 years from 34% to 26%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.3% to 26% over the past 5 years.
What does this mean?
Williams-Sonoma's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Williams-Sonoma has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Williams-Sonoma to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WSM’s future growth? Take a look at our free research report of analyst consensus for WSM’s outlook.
- Financial Health: Are WSM’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 03 February 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 firstname.lastname@example.org. 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.