How Has Australian Finance Group Limited’s (ASX:AFG) Performed Against The Industry?
Assessing Australian Finance Group Limited’s (ASX:AFG) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess AFG’s recent performance announced on 31 December 2017 and evaluate these figures to its longer term trend and industry movements.
View our latest analysis for Australian Finance Group
Did AFG’s recent earnings growth beat the long-term trend and the industry?
AFG’s trailing twelve-month earnings (from 31 December 2017) of AU$42.5m has jumped 74.9% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 18.3%, indicating the rate at which AFG is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is solely attributable to industry tailwinds, or if Australian Finance Group has experienced some company-specific growth.
Over the last few years, Australian Finance Group grew its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Inspecting growth from a sector-level, the Australian mortgage industry has been growing its average earnings by double-digit 10.2% over the past twelve months, and 13.1% over the past half a decade. This growth is a median of profitable companies of stocks internationally, operating in the Mortgage industry. I’ve decided to use a global peer group as there’s not enough companies in AU that are considered as appropriate peers, and I wanted to get a broader perspective on the regional growth. Some peers include Mortgage Choice, Genworth Mortgage Insurance Australia and MyState. This means that any uplift the industry is enjoying, Australian Finance Group is capable of amplifying this to its advantage.
In terms of returns from investment, Australian Finance Group has invested its equity funds well leading to a 37.8% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 1.9% exceeds the AU Mortgage industry of 0.8%, indicating Australian Finance Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Australian Finance Group’s debt level, has increased over the past 3 years from 2.3% to 4.6%.
What does this mean?
Though Australian Finance Group’s past data is helpful, it is only one aspect of my investment thesis. While Australian Finance Group has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Australian Finance Group to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for AFG’s future growth? Take a look at our free research report of analyst consensus for AFG’s outlook.
Financial Health: Are AFG’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.
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 past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
