After reading Brickworks Limited’s (ASX:BKW) latest earnings update (31 July 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether BKW has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. Check out our latest analysis for Brickworks
How Well Did BKW Perform?
I like to 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 blend allows me to analyze many different companies on a similar basis, using the latest information. “For Brickworks, its “, latest earnings is A$186.2M, which, against the previous year’s figure, has escalated by over 100%. Since these figures are fairly short-term thinking, I’ve estimated an annualized five-year figure for Brickworks’s net income, which stands at A$97.2M. This means on average, Brickworks has been able to gradually grow its bottom line over the past few years as well.
How has it been able to do this? Well, let’s take a look at whether it is merely attributable to industry tailwinds, or if Brickworks has experienced some company-specific growth. The hike in earnings seems to be supported by a robust top-line increase overtaking its growth rate of costs. Though this resulted in a margin contraction, it has made Brickworks more profitable. Eyeballing growth from a sector-level, the Australian basic materials industry has been growing its average earnings by double-digit 17.61% in the prior year, and a more muted 4.75% over the previous few years. This suggests that any uplift the industry is gaining from, Brickworks is able to amplify this to its advantage.
What does this mean?
While past data is useful, it 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 Brickworks to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for BKW’s future growth? Take a look at our free research report of analyst consensus for BKW’s outlook.
2. Financial Health: Is BKW’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.