When Netwealth Group Limited’s (ASX:NWL) 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 Netwealth 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 NWL actually performed well. Below is a quick commentary on how I see NWL has performed. View our latest analysis for Netwealth Group

How NWL fared against its long-term earnings performance and its industry

I look at 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 method enables me to examine various companies in a uniform manner using the most relevant data points. For Netwealth Group, its most recent trailing-twelve-month earnings is A$16.3M, which, relative to the previous year’s level, has jumped up by 14.06%. Given that these figures may be somewhat short-term thinking, I’ve computed an annualized five-year value for NWL’s earnings, which stands at A$11.2M. This suggests that, on average, Netwealth Group has been able to gradually grow its earnings over the past few years as well.

How has it been able to do this? Well, let’s take a look at if it is merely owing to an industry uplift, or if Netwealth Group has experienced some company-specific growth. In the past couple of years, Netwealth Group increased its bottom line faster than revenue by effectively controlling its costs. This has led to a margin expansion and profitability over time. Inspecting growth from a sector-level, the Australian capital markets industry has been growing, albeit, at a subdued single-digit rate of 6.89% in the previous year, and a substantial 11.48% over the previous few years. This suggests that any tailwind the industry is enjoying, Netwealth Group is able to leverage this to its advantage.

What does this mean?

While past data is useful, it doesn’t tell the whole story. While Netwealth Group has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Netwealth Group to get a better picture of the stock by looking at:

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