For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Floor & Decor Holdings, Inc.’s (NYSE:FND) 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.
Did FND’s recent earnings growth beat the long-term trend and the industry?
FND’s trailing twelve-month earnings (from 27 December 2018) of US$116m has jumped 13% 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 45%, indicating the rate at which FND is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, Floor & Decor Holdings has fallen short of achieving a 20% return on equity (ROE), recording 20% instead. However, its return on assets (ROA) of 10% exceeds the US Specialty Retail industry of 6.6%, indicating Floor & Decor Holdings has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Floor & Decor Holdings’s debt level, has increased over the past 3 years from 9.5% to 16%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 60% to 25% 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? I recommend you continue to research Floor & Decor Holdings to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for FND’s future growth? Take a look at our free research report of analyst consensus for FND’s outlook.
- Financial Health: Are FND’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 27 December 2018. 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.