Understanding AWF Madison Group Limited’s (NZSE:AWF) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how AWF Madison Group is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. View our latest analysis for AWF Madison Group
Despite a decline, did AWF underperform the long-term trend and the industry?
I look at the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to analyze many different companies on a similar basis, using the latest information. For AWF Madison Group, the latest twelve-month earnings is NZ$5M, which, against last year’s figure, has plunged by -6.51%. Since these figures are fairly myopic, I’ve estimated an annualized five-year value for AWF’s earnings, which stands at NZ$5M. This shows that while earnings declined from the prior year, in the long run, AWF Madison Group’s earnings have been growing on average.
What’s the driver of this growth? Well, let’s take a look at whether it is solely because of industry tailwinds, or if AWF Madison Group has experienced some company-specific growth. The ascend in earnings seems to be propelled by a substantial top-line increase outpacing its growth rate of costs. Though this resulted in a margin contraction, it has made AWF Madison Group more profitable. Looking at growth from a sector-level, the NZ professional services industry has been growing, albeit, at a muted single-digit rate of 8.17% in the prior twelve months, and 8.02% over the previous five years. This suggests that any tailwind the industry is deriving benefit from, AWF Madison Group has not been able to leverage it as much as its average peer.
What does this mean?
Though AWF Madison Group’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research AWF Madison Group to get a better picture of the stock by looking at:
1. Financial Health: Is AWF’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.
2. Valuation: What is AWF worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether AWF is currently mispriced by the market.