After reading Intact Financial Corporation’s (TSX:IFC) most recent earnings announcement (31 March 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 tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Intact Financial
How IFC fared against its long-term earnings performance and its industry
I prefer to use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend enables me to analyze various companies on a similar basis, using the latest information. For Intact Financial, its latest earnings (trailing twelve month) is CA$719.00M, which, in comparison to the previous year’s figure, has moved up by 39.61%. Since these values may be relatively short-term, I’ve calculated an annualized five-year figure for IFC’s net income, which stands at CA$579.21M This means on average, Intact Financial has been able to steadily raise 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 industry tailwinds, or if Intact Financial has seen some company-specific growth. The ascend in earnings seems to be driven by a substantial top-line increase overtaking its growth rate of costs. Though this has caused a margin contraction, it has made Intact Financial more profitable. Eyeballing growth from a sector-level, the Canadian insurance industry has been enduring some headwinds over the past year, leading to an average earnings drop of -10.77%. This is a major change, given that the industry has constantly been delivering a a robust growth of 14.66% in the last five years. This means that whatever recent headwind the industry is facing, Intact Financial is relatively better-cushioned than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Intact Financial gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Intact Financial to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for IFC’s future growth? Take a look at our free research report of analyst consensus for IFC’s outlook.
- Financial Health: Is IFC’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.