After looking at AMCON Distributing Company’s (NYSEMKT:DIT) latest earnings update (31 December 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Have DIT’s earnings improved against past performances and the industry?
DIT’s trailing twelve-month earnings (from 31 December 2018) of US$3.4m has declined by -0.1% 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 -9.2%, indicating the rate at which DIT is growing has slowed down. Why could this be happening? Let’s examine what’s going on with margins and whether the entire industry is feeling the heat.
In terms of returns from investment, AMCON Distributing has fallen short of achieving a 20% return on equity (ROE), recording 5.1% instead. Furthermore, its return on assets (ROA) of 3.9% is below the US Retail Distributors industry of 7.1%, indicating AMCON Distributing’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for AMCON Distributing’s debt level, has declined over the past 3 years from 14% to 9.1%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Typically companies that endure a drawn out period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and growth. I suggest you continue to research AMCON Distributing to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DIT’s future growth? Take a look at our free research report of analyst consensus for DIT’s outlook.
- Financial Health: Are DIT’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 31 December 2018. This may not be consistent with full year annual report figures.
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