After looking at Aflac Incorporated’s (NYSE:AFL) latest earnings update (30 September 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. Check out our latest analysis for Aflac
Did AFL’s recent earnings growth beat the long-term trend and the industry?
I like 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 allows me to examine different companies in a uniform manner using the latest information. For Aflac, its latest trailing-twelve-month earnings is $2,772.0M, which, in comparison to the previous year’s figure, has grown by a fairly soft 5.08%. Given that these values are fairly short-term, I have computed an annualized five-year figure for AFL’s earnings, which stands at $2,652.1M. This means generally, Aflac has been able to consistently grow its bottom line over the last few years as well.
What’s enabled this growth? Well, let’s take a look at if it is only owing to an industry uplift, or if Aflac has seen some company-specific growth. Over the past couple of years, Aflac expanded bottom-line, while its top-line fell, by effectively managing its costs. This has led to to a margin expansion and profitability over time. Looking at growth from a sector-level, the US insurance industry has been growing, albeit, at a muted single-digit rate of 6.15% over the previous year, and 8.75% over the previous few years. This shows that whatever uplift the industry is enjoying, Aflac has not been able to leverage it as much as its average peer.
What does this mean?
Though Aflac’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 Aflac to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for AFL’s future growth? Take a look at our free research report of analyst consensus for AFL’s outlook.
2. Financial Health: Is AFL’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 trailing twelve months from 30 September 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.