With -142.7% EPS Drop, Should AMP Limited’s (ASX:AMP) Recent Track Record Be A Cause Of Concern?
Today I will examine AMP Limited’s (ASX:AMP) latest earnings update (30 June 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of AMP’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. View our latest analysis for AMP
How Well Did AMP Perform?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique allows me to examine different companies on a more comparable basis, using the latest information. For AMP, the most recent bottom-line -A$422.0M, which, in comparison to the previous year’s level, has turned from positive to negative. Given that these values may be relatively short-term thinking, I’ve calculated an annualized five-year value for AMP’s earnings, which stands at A$637.4M.
Additionally, we can evaluate AMP’s loss by looking at what’s going on in the industry on top of within the company. Initially, I want to quickly look into the line items. Revenue growth over past few years has risen by a mere 7.30%. Given that top-line growth is also pretty flat, the key to profitability in the future would be managing cost growth rates. Looking at growth from a sector-level, the Australian diversified financial services industry has been enduring some headwinds over the previous year, leading to an average earnings drop of -3.35%. This is a major change, given that the industry has constantly been delivering a a robust growth of 14.46% in the past five years. This shows that whatever near-term headwind the industry is enduring, it’s hitting AMP harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to predict what will happen in the future and when. The most useful step is to examine company-specific issues AMP may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research AMP to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for AMP’s future growth? Take a look at our free research report of analyst consensus for AMP’s outlook.
2. Financial Health: Is AMP’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.
