For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on National Australia Bank Limited (ASX:NAB) useful as an attempt to give more color around how National Australia Bank is currently performing. Check out our latest analysis for National Australia Bank
Did NAB perform worse than its track record and industry?
I prefer 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 technique allows me to examine different companies on a more comparable basis, using the latest information. For National Australia Bank, the latest twelve-month earnings is A$6,080.0M, which, in comparison to the prior year’s figure, has declined by -3.43%. Since these values may be relatively short-term, I have computed an annualized five-year figure for National Australia Bank’s net income, which stands at A$5,259.3M. This shows that though earnings declined from the prior year, in the long run, National Australia Bank’s profits have been increasing on average.
What’s the driver of this growth? Well, let’s take a look at if it is only because of industry tailwinds, or if National Australia Bank has experienced some company-specific growth. In the last few years, National Australia Bank increased its bottom line faster than revenue by efficiently controlling its costs. This resulted in a margin expansion and profitability over time. Looking at growth from a sector-level, the Australian banks industry has been relatively flat in terms of earnings growth over the previous couple of years. This shows that whatever near-term headwind the industry is experiencing, it’s hitting National Australia Bank harder than its peers.
What does this mean?
Though National Australia Bank’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research National Australia Bank to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for NAB’s future growth? Take a look at our free research report of analyst consensus for NAB’s outlook.
2. Financial Health: Is NAB’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.