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Does Alliance Aviation Services Limited's (ASX:AQZ) 26% Earnings Growth Reflect The Long-Term Trend?

Simply Wall St

For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Alliance Aviation Services Limited's (ASX:AQZ) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.

View our latest analysis for Alliance Aviation Services

Did AQZ beat its long-term earnings growth trend and its industry?

AQZ's trailing twelve-month earnings (from 30 June 2019) of AU$23m has jumped 26% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 51%, indicating the rate at which AQZ is growing has slowed down. Why could this be happening? Well, let's examine what's occurring with margins and if the rest of the industry is facing the same headwind.

ASX:AQZ Income Statement, January 28th 2020

In terms of returns from investment, Alliance Aviation Services has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 8.4% exceeds the AU Airlines industry of 5.3%, indicating Alliance Aviation Services has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Alliance Aviation Services’s debt level, has increased over the past 3 years from 9.9% to 15%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 65% to 36% over the past 5 years.

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 Alliance Aviation Services gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Alliance Aviation Services to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for AQZ’s future growth? Take a look at our free research report of analyst consensus for AQZ’s outlook.
  2. Financial Health: Are AQZ’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 June 2019. This may not be consistent with full year annual report figures.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.