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 Grenke AG (XTRA:GLJ) useful as an attempt to give more color around how Grenke is currently performing. Check out our latest analysis for Grenke
Were GLJ’s earnings stronger than its past performances and the industry?
I prefer to use data from the most recent 12 months, 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 enables me to assess different stocks on a similar basis, using the most relevant data points. For Grenke, its most recent bottom-line (trailing twelve month) is €125.50M, which, in comparison to the prior year’s level, has increased by 20.97%. Given that these figures are fairly short-term, I have calculated an annualized five-year figure for Grenke’s net income, which stands at €68.83M This shows that, on average, Grenke has been able to consistently grow its bottom line over the last few years as well.
What’s the driver of this growth? Let’s take a look at whether it is merely attributable to an industry uplift, or if Grenke has experienced some company-specific growth. Over the past couple of years, Grenke grew its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the DE diversified financial industry has been growing its average earnings by double-digit 16.25% over the prior twelve months, and 13.65% over the past five years. This suggests that any uplift the industry is benefiting from, Grenke is capable of leveraging this to its advantage.
What does this mean?
Grenke’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While Grenke has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Grenke to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GLJ’s future growth? Take a look at our free research report of analyst consensus for GLJ’s outlook.
- Financial Health: Is GLJ’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.
- 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 31 March 2018. 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.