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Examining Ridley Corporation Limited’s (ASX:RIC) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess RIC’s latest performance announced on 31 December 2017 and weight these figures against its longer term trend and industry movements. Check out our latest analysis for Ridley
Was RIC’s weak performance lately a part of a long-term decline?
I prefer to 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 technique allows me to assess many different companies in a uniform manner using the most relevant data points. For Ridley, its most recent bottom-line (trailing twelve month) is AU$24.24M, which, against the previous year’s figure, has dropped by -21.83%. Since these values may be somewhat short-term thinking, I’ve computed an annualized five-year figure for Ridley’s net income, which stands at AU$17.10M This means despite the fact that earnings declined against the prior year, over time, Ridley’s profits have been growing on average.
How has it been able to do this? Let’s see if it is solely due to industry tailwinds, or if Ridley has seen some company-specific growth. In the past few years, Ridley grew its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the Australian food industry has been growing its average earnings by double-digit 16.20% in the past twelve months, and 18.60% over the past five. This means that any uplift the industry is profiting from, Ridley has not been able to leverage it as much as its average peer.
What does this mean?
Though Ridley’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors impacting its business. I recommend you continue to research Ridley to get a better picture of the stock by looking at:
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1. Future Outlook: What are well-informed industry analysts predicting for RIC’s future growth? Take a look at our free research report of analyst consensus for RIC’s outlook.
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2. Financial Health: Is RIC’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.
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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.