Examining Dunelm Group plc's (LSE:DNLM) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess DNLM's latest performance announced on 28 December 2019 and weight these figures against its longer term trend and industry movements.
How DNLM fared against its long-term earnings performance and its industry
DNLM's trailing twelve-month earnings (from 28 December 2019) of UK£113m has jumped 35% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -0.9%, indicating the rate at which DNLM is growing has accelerated. How has it been able to do this? Let's take a look at if it is only because of industry tailwinds, or if Dunelm Group has experienced some company-specific growth.
In terms of returns from investment, Dunelm Group has invested its equity funds well leading to a 78% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 18% exceeds the GB Specialty Retail industry of 4.4%, indicating Dunelm Group has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Dunelm Group’s debt level, has declined over the past 3 years from 45% to 32%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.9% to 47% over the past 5 years.
What does this mean?
Dunelm Group'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? I recommend you continue to research Dunelm Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for DNLM’s future growth? Take a look at our free research report of analyst consensus for DNLM’s outlook.
- Financial Health: Are DNLM’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 28 December 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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