When Transurban Group’s (ASX:TCL) announced its latest earnings (30 June 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Transurban Group’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not TCL actually performed well. Below is a quick commentary on how I see TCL has performed. Check out our latest analysis for Transurban Group
Did TCL beat its long-term earnings growth trend and its industry?
I look at 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 enables me to assess many different companies on a similar basis, using the most relevant data points. For Transurban Group, its latest earnings (trailing twelve month) is A$239.0M, which, in comparison to last year’s level, has soared up by more than double. Given that these values may be somewhat myopic, I’ve determined an annualized five-year value for TCL’s net income, which stands at A$102.4M. This means that, generally, Transurban Group has been able to increasingly improve its net income over the past couple of years as well.
How has it been able to do this? Let’s see if it is merely a result of an industry uplift, or if Transurban Group has experienced some company-specific growth. The hike in earnings seems to be supported by a solid top-line increase outpacing its growth rate of costs. Though this brought about a margin contraction, it has made Transurban Group more profitable. Scanning growth from a sector-level, the Australian transportation infrastructure industry has been growing its average earnings by double-digit 26.80% in the prior year, and a more subdued 6.47% over the previous few years. This suggests that whatever uplift the industry is enjoying, Transurban Group is capable of leveraging this to its advantage.
What does this mean?
Though Transurban Group’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 suggest you continue to research Transurban Group to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for TCL’s future growth? Take a look at our free research report of analyst consensus for TCL’s outlook.