For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on M.D.C. Holdings, Inc. (NYSE:MDC) useful as an attempt to give more color around how M.D.C. Holdings is currently performing.
Did MDC beat its long-term earnings growth trend and its industry?
MDC's trailing twelve-month earnings (from 30 September 2019) of US$199m has jumped 11% 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 29%, indicating the rate at which MDC is growing has slowed down. What could be happening here? Well, let's examine what's going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, M.D.C. Holdings has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 6.0% is below the US Consumer Durables industry of 6.7%, indicating M.D.C. Holdings's are utilized less efficiently. However, its return on capital (ROC), which also accounts for M.D.C. Holdings’s debt level, has increased over the past 3 years from 6.4% to 11%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 93% to 64% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research M.D.C. Holdings to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MDC’s future growth? Take a look at our free research report of analyst consensus for MDC’s outlook.
- Financial Health: Are MDC’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 September 2019. This may not be consistent with full year annual report figures.
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.
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