After looking at DST Systems Inc’s (NYSE:DST) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether DST Systems’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for DST Systems
Were DST’s earnings stronger than its past performances and the industry?
I look at 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 analyze various companies on a more comparable basis, using new information. For DST Systems, its latest earnings (trailing twelve month) is $420.4M, which, relative to the prior year’s level, has climbed up by over 100%. Given that these figures may be relatively myopic, I have estimated an annualized five-year value for DST Systems’s net income, which stands at $338.6M. This means on average, DST Systems has been able to gradually improve its bottom line over the past few years as well.
What’s enabled this growth? Let’s take a look at if it is solely due to an industry uplift, or if DST Systems has experienced some company-specific growth. In the past couple of years, DST Systems expanded bottom-line, while its top-line declined, by efficiently controlling its costs. This resulted in to a margin expansion and profitability over time. Inspecting growth from a sector-level, the US it industry has been growing, albeit, at a subdued single-digit rate of 5.40% over the previous year, and a substantial 12.46% over the past half a decade. This suggests that whatever tailwind the industry is profiting from, DST Systems is capable of amplifying this to its advantage.
What does this mean?
Though DST Systems’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 DST Systems to get a better picture of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for DST’s future growth? Take a look at our free research report of analyst consensus for DST’s outlook.
- 2. Financial Health: Is DST’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.