For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Australian Agricultural Projects Ltd (ASX:AAP) useful as an attempt to give more color around how Australian Agricultural Projects is currently performing. Check out our latest analysis for Australian Agricultural Projects
Could AAP beat the long-term trend and outperform its industry?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This allows me to analyze many different companies on a similar basis, using the most relevant data points. “For Australian Agricultural Projects, its “, latest earnings is A$0.4M, which, relative to the prior year’s figure, has risen by 16.19%. Given that these figures are fairly short-term thinking, I have estimated an annualized five-year value for Australian Agricultural Projects’s net income, which stands at -A$0.9M. This means on average, Australian Agricultural Projects has been able to steadily raise its earnings over the past couple of years as well.
What’s the driver of this growth? Let’s see whether it is only owing to an industry uplift, or if Australian Agricultural Projects has experienced some company-specific growth. In the last few years, Australian Agricultural Projects increased bottom-line, while its top-line declined, by efficiently managing its costs. This brought about to a margin expansion and profitability over time. Inspecting growth from a sector-level, the Australian food industry has been growing its average earnings by double-digit 16.20% in the prior twelve months, and 18.60% over the past five years. This means any uplift the industry is deriving benefit from, Australian Agricultural Projects has not been able to gain as much as its industry peers.
What does this mean?
Though Australian Agricultural Projects’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? You should continue to research Australian Agricultural Projects to get a better picture of the stock by looking at:
1. Financial Health: Is AAP’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.