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For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at Perpetual Equity Investment Company Limited’s (ASX:PIC) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. Check out our latest analysis for Perpetual Equity Investment
How PIC fared against its long-term earnings performance and its industry
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, 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 allows me to analyze different companies in a uniform manner using the latest information. For Perpetual Equity Investment, its latest trailing-twelve-month earnings is AU$29.74M, which, against the previous year’s figure, has escalated by a substantial 70.91%. Given that these figures may be somewhat myopic, I’ve calculated an annualized five-year value for Perpetual Equity Investment’s net income, which stands at AU$19.59M This suggests that, on average, Perpetual Equity Investment has been able to increasingly raise its profits over the past few years as well.
How has it been able to do this? Let’s take a look at if it is only attributable to an industry uplift, or if Perpetual Equity Investment has seen some company-specific growth. Over the past couple of years, Perpetual Equity Investment increased its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Eyeballing growth from a sector-level, the Australian capital markets industry has been growing, albeit, at a subdued single-digit rate of 8.71% over the prior twelve months, and a substantial 16.58% over the previous five years. This suggests that any tailwind the industry is gaining from, Perpetual Equity Investment is capable of amplifying this to its advantage.
What does this mean?
Though Perpetual Equity Investment’s past data is helpful, it is only one aspect of my investment thesis. While Perpetual Equity Investment has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Perpetual Equity Investment to get a more holistic view of the stock by looking at:
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1. Financial Health: Is PIC’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.
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2. Valuation: What is PIC worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PIC is currently mispriced by the market.
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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 31 December 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.