Service Stream Limited’s (ASX:SSM) Earnings Grew 41.97% In A Year. Was It Better Than Its Long-Term Trend?
Assessing Service Stream Limited’s (ASX:SSM) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess SSM’s recent performance announced on 30 June 2017 and evaluate these figures to its long-term trend and industry movements. View our latest analysis for Service Stream
How SSM fared against its long-term earnings performance and its industry
I look at data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This blend enables me to assess many different companies on a similar basis, using new information. For Service Stream, its most recent earnings (trailing twelve month) is A$28.4M, which, relative to the previous year’s figure, has increased by 41.97%. Given that these figures are relatively nearsighted, I’ve computed an annualized five-year figure for SSM’s earnings, which stands at -A$3.5M. This means that, generally, Service Stream has been able to consistently grow its earnings over the past few years as well.
What’s enabled this growth? Well, let’s take a look at whether it is solely due to industry tailwinds, or if Service Stream has seen some company-specific growth. In the past few years, Service Stream grew bottom-line, while its top-line fell, by efficiently managing its costs. This brought about to a margin expansion and profitability over time. Looking at growth from a sector-level, the Australian construction and engineering industry has been enduring some headwinds over the previous couple of years, leading to an average earnings drop of -10.60% in the most recent year. This shows that whatever near-term headwind the industry is experiencing, Service Stream is less exposed compared to its peers.
What does this mean?
Though Service Stream’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 Service Stream to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for SSM’s future growth? Take a look at our free research report of analyst consensus for SSM’s outlook.
2. Financial Health: Is SSM’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 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.
