Examining RXP Services Limited’s (ASX:RXP) past track record of performance is a valuable exercise for investors. It enables us to understand whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess RXP’s latest performance announced on 30 June 2017 and weigh these figures against its longer term trend and industry movements. Check out our latest analysis for RXP Services
How RXP fared against its long-term earnings performance and its industry
I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to assess various companies on a more comparable basis, using the latest information. RXP Services’s most recent bottom-line is A$12M, which, against the previous year’s level, has risen by a relatively unexciting 9.60%. Given that these figures are somewhat short-term thinking, I have computed an annualized five-year figure for RXP’s earnings, which stands at A$6M. This suggests that, on average, RXP Services has been able to gradually grow its bottom line over the past few years as well.
What’s enabled this growth? Let’s see if it is only a result of industry tailwinds, or if RXP Services has experienced some company-specific growth. The climb in earnings seems to be driven by a solid top-line increase outpacing its growth rate of costs. Though this has led to a margin contraction, it has made RXP Services more profitable. Looking at growth from a sector-level, the Australian it services industry has been growing its average earnings by double-digit 15.89% over the prior twelve months, and 19.63% over the previous five years. This means that whatever tailwind the industry is benefiting from, RXP Services has not been able to reap as much as its industry peers.
What does this mean?
RXP Services’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research RXP Services to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for RXP’s future growth? Take a look at our free research report of analyst consensus for RXP’s outlook.
2. Financial Health: Is RXP’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.