Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does E I Du Pont De Nemours And Co (NYSE:DD) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.
What we’re looking for
The graphs you’re about to see tell E I Du Pont De Nemours And Co (NYSE:DD)’s story, and we’ll be grading the quality of that story in several ways:
- Growth: are profits, margins, and free cash flow all increasing?
- Valuation: is share price growing in line with earnings per share?
- Opportunities: is return on equity increasing while debt to equity declines?
- Dividends: are dividends consistently growing in a sustainable way?
What the numbers tell you
Now, let’s take a look at E I Du Pont De Nemours And Co (NYSE:DD)’s key statistics:
DD Total Return Price data by YCharts
| Passing Criteria | 3-Year* Change | Grade |
|---|---|---|
| Revenue growth > 30% | 14.6% | Fail |
| Improving profit margin | 25.1% | Pass |
| Free cash flow growth > Net income growth | (53.5%) vs. 43.4% | Fail |
| Improving EPS | 40.5% | Pass |
| Stock growth (+ 15%) < EPS growth | 83% vs. 40.5% | Fail |
Source: YCharts. * Period begins at end of Q2 2010.
DD Return on Equity data by YCharts
| Passing Criteria | 3-Year* Change | Grade |
|---|---|---|
| Improving return on equity | (2.4%) | Fail |
| Declining debt to equity | No debt | Pass |
| Dividend growth > 25% | 9.76% | Fail |
| Free cash flow payout ratio < 50% | 79.8% | Fail |
Source: YCharts. * Period begins at end of Q2 2010.
How we got here and where we’re going
E I Du Pont De Nemours And Co (NYSE:DD) is looking a little sickly today with only three out of nine possible passing grades. DuPont’s net income had held relatively steady before its recent spike, but free cash flow has been in a steady decline. Investors have been chasing this stock for years, which has resulted in a share price growing far in excess of its underlying earnings. Is E I Du Pont De Nemours And Co (NYSE:DD)’s post-crash rebound sustainable, or will the mediocrity of most of the company’s fundamentals catch up to it eventually? Let’s dig a little deeper.
