In this article, I will take a look at CIMIC Group Limited’s (ASX:CIM) most recent earnings update (30 September 2017) and compare these latest figures against its performance over the past few years, along with how the rest of CIM’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. View our latest analysis for CIMIC Group
How CIM fared against its long-term earnings performance and its industry
I like to use the ‘latest twelve-month’ data, 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 blend allows me to analyze different stocks on a similar basis, using the most relevant data points. “For CIMIC Group, its “, most recent twelve-month earnings is A$667.7M, which, against last year’s level, has risen by 22.83%. Given that these figures are relatively short-term, I’ve computed an annualized five-year figure for CIMIC Group’s net income, which stands at A$404.7M. This means on average, CIMIC Group has been able to increasingly raise its earnings over the past few years as well.
What’s enabled this growth? Well, let’s take a look at if it is merely attributable to industry tailwinds, or if CIMIC Group has seen some company-specific growth. In the past few years, CIMIC Group expanded bottom-line, while its top-line declined, by efficiently controlling its costs. This brought about to a margin expansion and profitability over time. Eyeballing 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 means that whatever near-term headwind the industry is experiencing, CIMIC Group is relatively better-cushioned than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research CIMIC Group to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for CIM’s future growth? Take a look at our free research report of analyst consensus for CIM’s outlook.
2. Financial Health: Is CIM’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.