Was Washington Federal Inc’s (NASDAQ:WAFD) Earnings Growth Better Than The Industry’s?
After reading Washington Federal Inc’s (NASDAQ:WAFD) most recent earnings announcement (30 June 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Washington Federal’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Check out our latest analysis for Washington Federal
How Well Did WAFD Perform?
WAFD’s trailing twelve-month earnings (from 30 June 2018) of US$198.4m has jumped 15.6% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 5.8%, indicating the rate at which WAFD is growing has accelerated. What’s enabled this growth? Let’s see if it is merely a result of industry tailwinds, or if Washington Federal has seen some company-specific growth.
Over the past few years, Washington Federal grew its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the US mortgage industry has been growing, albeit, at a muted single-digit rate of 9.4% over the prior year, and a substantial 13.6% over the last five years. This growth is a median of profitable companies of 25 Mortgage companies in US including BV Financial, FSB Bancorp and Bancorp 34. This suggests that whatever tailwind the industry is benefiting from, Washington Federal is able to amplify this to its advantage.
In terms of returns from investment, Washington Federal has fallen short of achieving a 20% return on equity (ROE), recording 10.0% instead. However, its return on assets (ROA) of 1.3% exceeds the US Mortgage industry of 0.7%, indicating Washington Federal has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Washington Federal’s debt level, has declined over the past 3 years from 6.9% to 5.9%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 100% to 120% over the past 5 years.
What does this mean?
Though Washington Federal’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 Washington Federal to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for WAFD’s future growth? Take a look at our free research report of analyst consensus for WAFD’s outlook.
Financial Health: Are WAFD’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 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
