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In this commentary, I will examine Aurizon Holdings Limited’s (ASX:AZJ) latest earnings update (31 December 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the transportation industry performed. As an investor, I find it beneficial to assess AZJ’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. Check out our latest analysis for Aurizon Holdings

Despite a decline, did AZJ underperform the long-term trend and the industry?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to analyze various companies in a uniform manner using the latest information. For Aurizon Holdings, its most recent earnings (trailing twelve month) is -AU$92.20M, which, in comparison to last year’s figure, has turned from positive to negative. Given that these values are somewhat myopic, I have computed an annualized five-year value for Aurizon Holdings’s net income, which stands at AU$292.61M.

We can further evaluate Aurizon Holdings’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Aurizon Holdings’s revenue growth has been relatively soft, with an annual growth rate of -0.011%, on average. The company’s inability to breakeven has been aided by the relatively flat top-line in the past. Inspecting growth from a sector-level, the Australian transportation industry has been growing its average earnings by double-digit 22.02% in the past twelve months, and 10.93% over the last five years. This means any uplift the industry is benefiting from, Aurizon Holdings has not been able to leverage it as much as its average peer.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will occur going forward, and when. The most insightful step is to examine company-specific issues Aurizon Holdings may be facing and whether management guidance has consistently been met in the past. I suggest you continue to research Aurizon Holdings to get a more holistic view of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for AZJ’s future growth? Take a look at our free research report of analyst consensus for AZJ’s outlook.

• 2. Financial Health: Is AZJ’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.

• 3. 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 31 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.