With A -6.6% Earnings Drop, Did DICK'S Sporting Goods, Inc. (NYSE:DKS) Really Underperform?

For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine DICK'S Sporting Goods, Inc.'s (NYSE:DKS) 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.

Check out our latest analysis for DICK'S Sporting Goods

How Did DKS's Recent Performance Stack Up Against Its Past?

DKS's trailing twelve-month earnings (from 03 August 2019) of US$310m has declined by -6.6% 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 -1.6%, indicating the rate at which DKS is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and if the whole industry is facing the same headwind.

In terms of returns from investment, DICK'S Sporting Goods has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. Furthermore, its return on assets (ROA) of 4.7% is below the US Specialty Retail industry of 5.9%, indicating DICK'S Sporting Goods's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for DICK'S Sporting Goods’s debt level, has declined over the past 3 years from 20% to 8.6%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.8% to 25% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. In some cases, companies that experience a drawn out period of decline in earnings are going through some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a sign of a structural shift, which makes DICK'S Sporting Goods and its peers a riskier investment. I suggest you continue to research DICK'S Sporting Goods to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for DKS’s future growth? Take a look at our free research report of analyst consensus for DKS’s outlook.
2. Financial Health: Are DKS’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.
3. 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 August 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 editorial-team@simplywallst.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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