Understanding Diploma PLC's (LSE:DPLM) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Diploma is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period.
How DPLM fared against its long-term earnings performance and its industry
DPLM's trailing twelve-month earnings (from 30 September 2019) of UK£62m has jumped 15% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 12%, indicating the rate at which DPLM is growing has accelerated. What's enabled this growth? Let's see whether it is solely a result of industry tailwinds, or if Diploma has experienced some company-specific growth.
In terms of returns from investment, Diploma has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 12% exceeds the GB Trade Distributors industry of 7.1%, indicating Diploma has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Diploma’s debt level, has increased over the past 3 years from 21% to 21%.
What does this mean?
Diploma's track record can be a valuable insight into its earnings performance, but it certainly 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 Diploma to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DPLM’s future growth? Take a look at our free research report of analyst consensus for DPLM’s outlook.
- Financial Health: Are DPLM’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 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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