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Does Steadfast Group Limited's (ASX:SDF) 37% Earnings Growth Reflect The Long-Term Trend?

Simply Wall St

When Steadfast Group Limited's (ASX:SDF) announced its latest earnings (30 June 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Steadfast Group's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not SDF actually performed well. Below is a quick commentary on how I see SDF has performed.

See our latest analysis for Steadfast Group

How Well Did SDF Perform?

SDF's trailing twelve-month earnings (from 30 June 2019) of AU$104m has jumped 37% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 19%, indicating the rate at which SDF is growing has accelerated. How has it been able to do this? Let's see whether it is only due to industry tailwinds, or if Steadfast Group has experienced some company-specific growth.

ASX:SDF Income Statement, September 6th 2019

In terms of returns from investment, Steadfast Group has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 5.5% exceeds the AU Insurance industry of 4.3%, indicating Steadfast Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Steadfast Group’s debt level, has increased over the past 3 years from 8.8% to 12%.

What does this mean?

Though Steadfast Group'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 recommend you continue to research Steadfast Group to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for SDF’s future growth? Take a look at our free research report of analyst consensus for SDF’s outlook.
  2. Financial Health: Are SDF’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.

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.

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. Thank you for reading.