Is E I Du Pont De Nemours And Co (DD) Destined for Greatness?

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:DDfit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

E I Du Pont De Nemours And Co (NYSE:DD)

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 Chart

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 Chart

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.