CDW's Earnings Lag Shareholder Returns: A Closer Look
Monday, Nov 18, 2024 1:17 pm ET
4min read CDW Corporation (NASDAQ: CDW), a leading provider of integrated information technology solutions, has seen its earnings growth rate lag behind the 6.3% compound annual growth rate (CAGR) delivered to shareholders. This discrepancy raises questions about the company's product and service mix, acquisitions, organic growth, operating margins, and geographic expansion. Let's delve into these factors to understand the dynamics at play.
CDW's earnings growth rate has been slower than its shareholder returns, with a 5-year CAGR of 11.29% compared to the 6.3% CAGR in shareholder returns. This disparity can be attributed to several factors. Firstly, CDW's revenue growth has decelerated in recent years, with a 9.99% decline in 2023 compared to 2022, and a 6.43% decline in the twelve months ending June 30, 2024. Secondly, CDW's earnings growth has slowed down, with a 1.97% growth in the last year compared to its 5-year CAGR of 11.29%. Lastly, CDW's return on capital employed has decreased from 28% three years ago to 18.79% currently. These factors suggest that CDW's earnings growth has been impacted by a slowdown in revenue growth, a decrease in earnings growth rate, and a decline in capital efficiency.
CDW's earnings growth trajectory has been inconsistent over the past decade. From 2011 to 2021, CDW's earnings grew at a CAGR of 11.29%, compared to the US Information Technology Services industry average of 8.23% and the US market average of 23.67%. However, CDW's earnings growth has slowed in recent years, with a growth rate of just 1.97% in the last year, below its 5-year CAGR. This trend suggests a potential slowdown in CDW's earnings growth trajectory.
CDW's return on equity (ROE) of 51% is significantly higher than the US Information Technology Services industry average of 26.1% and the broader market average of 29.6%. This indicates that CDW is highly efficient at transforming shareholder equity into returns. However, CDW's return on assets (ROA) of 8.1% is slightly lower than the industry average of 8.89%, suggesting that CDW is not as efficient at generating returns from its assets as its peers.
To improve its earnings growth rate and better align with its CAGR delivered to shareholders, CDW could focus on strategic initiatives such as expanding its cloud and managed services offerings, investing in emerging technologies like IoT and AI, and enhancing its M&A strategy to acquire complementary businesses. By doing so, CDW can diversify its revenue streams, tap into new markets, and strengthen its market position.
In conclusion, CDW's earnings growth rate lagging its shareholder returns can be attributed to a combination of factors, including revenue growth deceleration, slower earnings growth, and decreased capital efficiency. To address this discrepancy, CDW should consider strategic initiatives to drive earnings growth and better align with its CAGR delivered to shareholders. As always, investors should monitor the company's performance and adapt their strategies accordingly to capitalize on market opportunities.
CDW's earnings growth rate has been slower than its shareholder returns, with a 5-year CAGR of 11.29% compared to the 6.3% CAGR in shareholder returns. This disparity can be attributed to several factors. Firstly, CDW's revenue growth has decelerated in recent years, with a 9.99% decline in 2023 compared to 2022, and a 6.43% decline in the twelve months ending June 30, 2024. Secondly, CDW's earnings growth has slowed down, with a 1.97% growth in the last year compared to its 5-year CAGR of 11.29%. Lastly, CDW's return on capital employed has decreased from 28% three years ago to 18.79% currently. These factors suggest that CDW's earnings growth has been impacted by a slowdown in revenue growth, a decrease in earnings growth rate, and a decline in capital efficiency.
CDW's earnings growth trajectory has been inconsistent over the past decade. From 2011 to 2021, CDW's earnings grew at a CAGR of 11.29%, compared to the US Information Technology Services industry average of 8.23% and the US market average of 23.67%. However, CDW's earnings growth has slowed in recent years, with a growth rate of just 1.97% in the last year, below its 5-year CAGR. This trend suggests a potential slowdown in CDW's earnings growth trajectory.
CDW's return on equity (ROE) of 51% is significantly higher than the US Information Technology Services industry average of 26.1% and the broader market average of 29.6%. This indicates that CDW is highly efficient at transforming shareholder equity into returns. However, CDW's return on assets (ROA) of 8.1% is slightly lower than the industry average of 8.89%, suggesting that CDW is not as efficient at generating returns from its assets as its peers.
To improve its earnings growth rate and better align with its CAGR delivered to shareholders, CDW could focus on strategic initiatives such as expanding its cloud and managed services offerings, investing in emerging technologies like IoT and AI, and enhancing its M&A strategy to acquire complementary businesses. By doing so, CDW can diversify its revenue streams, tap into new markets, and strengthen its market position.
In conclusion, CDW's earnings growth rate lagging its shareholder returns can be attributed to a combination of factors, including revenue growth deceleration, slower earnings growth, and decreased capital efficiency. To address this discrepancy, CDW should consider strategic initiatives to drive earnings growth and better align with its CAGR delivered to shareholders. As always, investors should monitor the company's performance and adapt their strategies accordingly to capitalize on market opportunities.
Disclaimer: the above is a summary showing certain market information. AInvest is not responsible for any data errors, omissions or other information that may be displayed incorrectly as the data is derived from a third party source. Communications displaying market prices, data and other information available in this post are meant for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any security. Please do your own research when investing. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. Keep in mind that while diversification may help spread risk, it does not assure a profit, or protect against loss in a down market.