For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Babcock International Group plc (LSE:BAB) useful as an attempt to give more color around how Babcock International Group is currently performing. View our latest analysis for Babcock International Group
How BAB fared against its long-term earnings performance and its industry
I look at 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 method allows me to analyze many different companies on a similar basis, using the latest information. For Babcock International Group, its latest earnings (trailing twelve month) is UK£323.10M, which compared to the prior year’s level, has grown by a somewhat unexciting 5.87%. Given that these values are relatively short-term thinking, I have calculated an annualized five-year value for BAB’s earnings, which stands at UK£220.94M This suggests that, generally, Babcock International Group has been able to steadily grow its earnings over the last few years as well.
How has it been able to do this? Let’s take a look at if it is only due to an industry uplift, or if Babcock International Group has seen some company-specific growth. In the past couple of years, Babcock International Group expanded its bottom line faster than revenue by efficiently controlling its costs. This resulted in a margin expansion and profitability over time. Looking at growth from a sector-level, the UK commercial services industry has been growing, albeit, at a unexciting single-digit rate of 3.74% over the previous twelve months, and 6.00% over the past half a decade. This shows that any recent headwind the industry is enduring, Babcock International Group is relatively better-cushioned than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Babcock International Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Babcock International Group to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for BAB’s future growth? Take a look at our free research report of analyst consensus for BAB’s outlook.
- 2. Financial Health: Is BAB’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.