In this article, I will take a look at Vita Group Limited’s (ASX:VTG) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, along with how the rest of VTG’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. See our latest analysis for VTG
How VTG fared against its long-term earnings performance and its industry
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 allows me to assess different companies on a more comparable basis, using new information. For Vita Group, the most recent bottom-line is A$39M, which, against last year’s figure, has grown by a somewhat muted 2.43%. Given that these figures may be fairly short-term thinking, I’ve determined an annualized five-year figure for Vita Group’s net income, which stands at A$13M. This means that, on average, Vita Group has been able to consistently grow its profits over the last few years as well.
What’s enabled this growth? Well, let’s take a look at whether it is merely due to an industry uplift, or if Vita Group has seen some company-specific growth. In the last couple of years, Vita Group expanded its bottom line faster than revenue by effectively controlling its costs. This brought about a margin expansion and profitability over time. Viewing growth from a sector-level, the Australian specialty retail industry has been growing its average earnings by double-digit 12.63% over the prior year, and a more muted 3.55% over the past five years. This suggests that any uplift the industry is benefiting from, Vita Group has not been able to realize the gains unlike its industry peers.
What does this mean?
Vita 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? You should continue to research Vita Group to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for VTG’s future growth? Take a look at our free research report of analyst consensus for VTG’s outlook.