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After looking at Corporate Travel Management Limited’s (ASX:CTD) latest earnings announcement (31 December 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Corporate Travel Management’s performance has been impacted by industry movements. In this article I briefly touch on my key findings.
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How Did CTD’s Recent Performance Stack Up Against Its Past?
CTD’s trailing twelve-month earnings (from 31 December 2017) of AU$63.03m has jumped 34.17% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 32.51%, indicating the rate at which CTD is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is merely owing to industry tailwinds, or if Corporate Travel Management has experienced some company-specific growth.
Over the past few years, Corporate Travel Management expanded its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Scanning growth from a sector-level, the Australian hospitality industry has been growing its average earnings by double-digit 18.18% over the previous year, and 19.17% over the last five years. This growth is a median of profitable companies of 16 Hospitality companies in AU including Crown Resorts, Star Entertainment Group and Ainsworth Game Technology. This means any uplift the industry is deriving benefit from, Corporate Travel Management is able to leverage this to its advantage.
In terms of returns from investment, Corporate Travel Management has fallen short of achieving a 20% return on equity (ROE), recording 15.81% instead. However, its return on assets (ROA) of 9.44% exceeds the AU Hospitality industry of 7.46%, indicating Corporate Travel Management has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Corporate Travel Management’s debt level, has increased over the past 3 years from 14.51% to 18.05%.
What does this mean?
Corporate Travel Management’s track record can be a valuable insight into its earnings performance, but it certainly 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 Corporate Travel Management to get a better picture of the stock by looking at: