Assessing Gowing Bros Limited’s (ASX:GOW) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess GOW’s recent performance announced on 31 July 2017 and evaluate these figures to its long-term trend and industry movements. See our latest analysis for Gowing Bros

Did GOW’s recent earnings growth beat the long-term trend and the industry?

I use 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 blend enables me to analyze different companies in a uniform manner using new information. For Gowing Bros, its most recent earnings (trailing twelve month) is AU$23.24M, which, in comparison to last year’s level, has risen by a somewhat soft 5.69%. Since these values may be relatively short-term thinking, I have created an annualized five-year figure for Gowing Bros’s net income, which stands at AU$13.63M This suggests that, on average, Gowing Bros has been able to steadily grow its net income over the past couple of years as well.

What’s the driver of this growth? Let’s see if it is solely owing to industry tailwinds, or if Gowing Bros has seen some company-specific growth. In the past couple of years, Gowing Bros increased its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Scanning growth from a sector-level, the Australian diversified financial industry has been growing, albeit, at a muted single-digit rate of 7.92% over the previous year, and 5.02% over the previous five years. This shows that whatever uplift the industry is benefiting from, Gowing Bros has not been able to leverage it as much as its average peer.

What does this mean?

Though Gowing Bros’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Gowing Bros to get a better picture of the stock by looking at:

• 1. Financial Health: Is GOW’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 GOW 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 GOW is currently mispriced by the market.

• 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 July 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.