For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Freedom Insurance Group Ltd (ASX:FIG) useful as an attempt to give more color around how Freedom Insurance Group is currently performing. Check out our latest analysis for Freedom Insurance Group

Were FIG’s earnings stronger than its past performances and the industry?

For the purpose of this commentary, I like to use data from the most recent 12 months, 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 allows me to assess many different companies on a more comparable basis, using new information. For Freedom Insurance Group, its latest earnings (trailing twelve month) is AU$15.67M, which, relative to last year’s figure, has jumped by a substantial 78.30%. Given that these values are somewhat myopic, I have determined an annualized five-year value for FIG’s earnings, which stands at AU$8.74M This means that, generally, Freedom Insurance Group has been able to gradually raise its earnings over the last few years as well.

How has it been able to do this? Let’s take a look at whether it is only due to industry tailwinds, or if Freedom Insurance Group has experienced some company-specific growth. In the last couple of years, Freedom Insurance Group increased its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Scanning growth from a sector-level, the Australian insurance industry has been growing, albeit, at a unexciting single-digit rate of 3.70% in the previous twelve months, and a substantial 11.42% over the last five years. This means any near-term headwind the industry is experiencing, the impact on Freedom Insurance Group has been softer relative to its peers.

What does this mean?

Freedom Insurance Group’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? I recommend you continue to research Freedom Insurance Group to get a more holistic view of the stock by looking at:

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

• 2. Financial Health: Is FIG’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.