Does Westpac Banking Corporation’s (ASX:WBC) 6% Earnings Growth Make It An Outperformer?
Today I will examine Westpac Banking Corporation’s (ASX:WBC) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of WBC’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. See our latest analysis for WBC
How WBC fared against its long-term earnings performance and its industry
For the most up-to-date info, I use 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 blend allows me to assess various companies on a more comparable basis, using the most relevant data points. Westpac Banking’s latest earnings is A$7,984.0M, which, relative to the prior year’s level, has increased by a relatively soft 7.31%. Given that these figures may be somewhat short-term thinking, I’ve determined an annualized five-year value for WBC’s net income, which stands at A$7,162.1M. This means generally, Westpac Banking has been able to gradually improve its net income over the past few years as well.
What’s the driver of this growth? Let’s see if it is only owing to an industry uplift, or if Westpac Banking has seen some company-specific growth. The ascend in earnings seems to be driven by a strong top-line increase overtaking its growth rate of costs. Though this has led to a margin contraction, it has made Westpac Banking more profitable. Looking at growth from a sector-level, the Australian banks industry has been growing, albeit, at a unexciting single-digit rate of 3.60% in the prior year, and 4.13% over the past five years. This shows that any recent headwind the industry is experiencing, Westpac Banking is less exposed compared to its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Westpac Banking has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Westpac Banking to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for WBC’s future growth? Take a look at our free research report of analyst consensus for WBC’s outlook.
2. Financial Health: Is WBC’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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.
