Yahoo Finance Interested In Office Depot Inc (NASDAQ:ODP)? Here’s How It Performed Recently
Assessing Office Depot Inc’s (NASDAQ:ODP) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Office Depot is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its specialty retail industry peers.
View our latest analysis for Office Depot
Was ODP weak performance lately part of a long-term decline?
ODP’s trailing twelve-month earnings (from 30 June 2018) of US$103.0m has more than halved from US$679.0m in the prior year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 34.0%, indicating the rate at which ODP is growing has slowed down. Why could this be happening? Let’s examine what’s occurring with margins and whether the entire industry is feeling the heat.
Over the last few years, revenue growth has been lagging behind earnings, which implies that Office Depot’s bottom line has been propelled by unsustainable cost-cutting. Viewing growth from a sector-level, the US specialty retail industry has been growing, albeit, at a muted single-digit rate of 8.1% over the previous year, and 7.3% over the previous five years. This growth is a median of profitable companies of 24 Specialty Retail companies in US including GameStop, Sports Direct International and Francesca’s Holdings. This suggests that whatever tailwind the industry is enjoying, Office Depot has not been able to realize the gains unlike its industry peers.
In terms of returns from investment, Office Depot has fallen short of achieving a 20% return on equity (ROE), recording 4.8% instead. Furthermore, its return on assets (ROA) of 2.8% is below the US Specialty Retail industry of 7.2%, indicating Office Depot’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Office Depot’s debt level, has declined over the past 3 years from 8.6% to 7.4%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 67.6% to 81.9% over the past 5 years.
What does this mean?
Office Depot’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I recommend you continue to research Office Depot to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ODP’s future growth? Take a look at our free research report of analyst consensus for ODP’s outlook.
Financial Health: Are ODP’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 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
