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After looking at Australia and New Zealand Banking Group Limited’s (ASX:ANZ) latest earnings announcement (30 September 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 tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. View our latest analysis for Australia and New Zealand Banking Group
Did ANZ’s recent earnings growth beat the long-term trend and the industry?
I use data from the most recent 12 months, 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 technique allows me to analyze various companies on a similar basis, using the latest information. For Australia and New Zealand Banking Group, its latest earnings (trailing twelve month) is AU$6.41B, which, relative to the prior year’s level, has increased by 12.21%. Given that these values are fairly short-term, I’ve determined an annualized five-year value for ANZ’s net income, which stands at AU$6.30B This shows that, on average, Australia and New Zealand Banking Group has been able to increasingly raise its profits over the past couple of years as well.
What’s the driver of this growth? Well, let’s take a look at if it is solely owing to industry tailwinds, or if Australia and New Zealand Banking Group has experienced some company-specific growth. The ascend in earnings seems to be supported by a robust top-line increase outpacing its growth rate of costs. Though this resulted in a margin contraction, it has made Australia and New Zealand Banking Group more profitable. Eyeballing growth from a sector-level, the Australian banks industry has been growing, albeit, at a unexciting single-digit rate of 8.03% over the past year, and 6.86% over the last five years. This means any uplift the industry is gaining from, Australia and New Zealand Banking Group is able to amplify this to its advantage.
What does this mean?
Australia and New Zealand Banking Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as Australia and New Zealand Banking Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Australia and New Zealand Banking Group to get a more holistic view of the stock by looking at: