Asbury Automotive Group Inc (NYSE:ABG): Does The Earnings Decline Make It An Underperformer?
When Asbury Automotive Group Inc (NYSE:ABG) announced its most recent earnings (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Asbury Automotive Group has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see ABG has performed. See our latest analysis for Asbury Automotive Group
How Well Did ABG Perform?
For the purpose of this commentary, 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 method allows me to analyze different companies on a similar basis, using the latest information. For Asbury Automotive Group, its most recent earnings (trailing twelve month) is US$139.10M, which compared to last year’s figure, has declined by -16.81%. Since these values are somewhat short-term, I have computed an annualized five-year figure for Asbury Automotive Group’s earnings, which stands at US$110.79M This suggests that even though earnings declined against the prior year, over a longer period of time, Asbury Automotive Group’s profits have been rising on average.
What’s the driver of this growth? Let’s take a look at whether it is solely due to industry tailwinds, or if Asbury Automotive Group has experienced some company-specific growth. In the last few years, Asbury Automotive Group increased its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the US specialty retail industry has been growing, albeit, at a subdued single-digit rate of 7.63% over the prior year, and 5.64% over the past five. This shows that whatever uplift the industry is enjoying, Asbury Automotive Group has not been able to gain as much as its average peer.
What does this mean?
Though Asbury Automotive Group’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I recommend you continue to research Asbury Automotive Group to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for ABG’s future growth? Take a look at our free research report of analyst consensus for ABG’s outlook.
2. Financial Health: Is ABG’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 31 December 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.
