Loading...

Australian Ethical Investment

ASX:AEF
Snowflake Description

Adequate balance sheet with acceptable track record.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
AEF
ASX
$137M
Market Cap
Asset Management and Custody Banks
Company description

Australian Ethical Investment Ltd is a publicly owned investment manager. More info.


Add to Portfolio Compare Print Invest WARNING!
Australian Ethical Investment is covered by less than 3 analysts.
SHARE PRICE
3 Month History
AEF
Industry
5yr Volatility vs Market
Competitors

Sorry, no analysis for Australian Ethical Investment Ltd's competitors could be found in our database.

Value

 Is Australian Ethical Investment undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of Australian Ethical Investment to its discounted cash flow value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

Dividends have been used for this discounted cash flow calculation, why is this?

  • The current share price of Australian Ethical Investment is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avacados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for Australian Ethical Investment's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are Australian Ethical Investment's earnings available for a low price, and how does this compare to other companies in the same industry?
  • Overvalued based on earnings compared to the Financial Institutions industry average.
  • Overvalued based on earnings compared to the overall market.
Price based on expected Growth
Does Australian Ethical Investment's expected growth come at a high price?
  • Information is not available.
Price based on value of assets
What value do investors place on Australian Ethical Investment's assets?
  • Overvalued based on assets compared to the Financial Institutions industry average.
X
Value checks
We assess Australian Ethical Investment's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) (Click here or on bar chart for details of DCF calculation.)
  2. Is the PE ratio less than the market average, and/ or less than the Financial Institutions industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Financial Institutions industry average (and greater than 0)? (1 check)
  5. Australian Ethical Investment has a total score of 0/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (0%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (Dividend Discount Model)

The calculations below outline how an intrinsic value for Australian Ethical Investment is arrived at by discounting future dividends to their present value. This approach is used for finance firms where free cash flow is difficult to estimate (e.g. Banks/ Insurance firms).

If the firm does not pay the majority of its earnings out as a dividend this method will often arrive at a value significantly lower than the share price.

See our documentation to learn about this calculation.



Value of the stock

Value = Expected dividends per share / (Discount Rate - Perpetual growth rate)
$33.28 = ($2.6 / (10.41% - 2.6%)

Value per share:
$33.28

Current discount (share price of $121.8): -266%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 10.41% = 2.6% + (1.056 * 7.4%)



Estimate of Bottom Up Beta

The Levered is used in the case of financial firms, but it is not adjusted for financial leverage like with non-finance firms. Therefore the average levered beta from comparable firms is used as the bottom-up beta. It is limited to 0.8 to 2.0 (practical range for a stable firm).

Average Levered Beta from peers = 1.056

Levered Beta used in calculation = 1.056



Assumptions
  1. The risk free rate of 2.6% is from the 10 year government bond rate in AU.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (10%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is Australian Ethical Investment expected to perform in the next 1 to 3 years based on estimates from 0 analysts?

  • Future performance analysis is based on estimates from less than 3 analysts.
The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
  • Insufficient estimate data, unable to calculate 1 year growth expectation.
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occured. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Analysts growth expectations
2 year growth check
Super high growth metrics x1.5?

Which of the these is expected to increase by over 50% in 2 year's time?

  • Revenue data unavailable.
  • Cash flow data unavailable.
  • Profit data unavailable.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • No 3 year Return on Equity data available.

Improvement & Relative to industry
  • No 3 year Return on Equity data available.
  • No 3 year Return on Equity data available.
X
Future performance checks
We assess Australian Ethical Investment's future performance by looking at:
  1. Is the growth in earnings expected to beat the low risk savings rate, plus a premium to keep pace with inflation, in 1 year and 3 years? (2 checks)
  2. Does the average analyst expect Revenue to increase by 50% or more in 2 years? (1 check)
  3. Does the average analyst expect Operating Cash Flow to increase by 50% or more in 2 years? (1 check)
  4. Does the average analyst expect Net Income (Profit) to increase by 50% or more in 2 years? (1 check)
  5. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
Australian Ethical Investment has a total score of 0/6, see the detailed checks below.

Note: If no +3 year data is available, +2.5 year data may be used.

Note 2: We use GAAP per Share in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

 How has Australian Ethical Investment performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare Australian Ethical Investment's growth in the last year to its industry (Financial Institutions).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • Australian Ethical Investment's earnings growth has not matched the industry average in the past year.
  • Australian Ethical Investment's 1 year earnings growth is negative.
  • Australian Ethical Investment has delivered strong earnings growth in the past 5 years.
Profit History
Australian Ethical Investment's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • Strong return on shareholders funds (ROE) last year.
  • Australian Ethical Investment performed above the Financial Institutions industry average based on return on assets (ROA) last year.
  • Performance based on revenue producing assets (ROCE) has been diminishing over 3 years.
X
Past performance checks
We assess Australian Ethical Investment's performance over the past 5 years by checking for:
  1. Has earnings per share (EPS) increased in past 5 years? (1 check)
  2. Has the EPS growth in the last year exceeded that of the Financial Institutions industry? (1 check)
  3. Is the current EPS growth higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
Australian Ethical Investment has a total score of 3/6, see the detailed checks below.

Note: We use GAAP Earnings per Share in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is Australian Ethical Investment's financial position? (This company is analysed differently as a bank or financial institution)

This company is a bank or financial institution.

Fundamentally a bank's business is based upon borrowing and lending money, for this reason they typically have high levels of debt and we analyse them differently.
Net Worth
      Balance sheet
      This treemap shows a more detailed breakdown of Australian Ethical Investment's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
      Assets
      Liabilities and shares
      The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
          Historical Debt
          Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

          The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

          If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
          • Australian Ethical Investment has no debt.
          BANK ANALYSIS

          This company is a bank or financial institution, which is analysed accordingly below.

          Below we check the amount of loans the bank has, how many of those are bad, and its ability to cover any bad loans.
          • Acceptable proportion of non-loan assets held.
          • Information is not available.
          • Holds no customer deposits, loans are made up entirely of borrowed funds.
          • The banks level of assets compared to its equity is low (i.e. an appropriate level of borrowing to fund lending).
          • High level of bad loan coverage.
          • Acceptable level of bad loan write offs (less than 2%).
          X
          Financial health checks (Bank)
          We assess Australian Ethical Investment's financial health as a bank by checking for:
          1. Leverage (Assets to Equity > 20x)? (1 check)
          2. Coverage of bad loans (Bad Loan Coverage > 100%)? (1 check)
          3. Proportion of lower risk deposits compared to total funding (Deposits to Liabilities < 50%)? (1 check)
          4. Proportion of higher risk assets compared to total assets (Loans to Assets > 110%)? (1 check)
          5. Total loans compared to deposit funding (Loans to Deposits > 125%)? (1 check)
          6. Level of bad loans (Net Charge Off Ratio > 3%)? (1 check)
          7. Australian Ethical Investment has a total score of 4/6, see the detailed checks below.


          Full details on the Health part of the Simply Wall St company analysis model.

          Dividends

           What is Australian Ethical Investment's current dividend yield, its reliability and sustainability?

          Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
          Annual Dividend Income
          Dividend payments
          2.18%
          Current annual income from Australian Ethical Investment dividends.
          If you bought $2,000 of Australian Ethical Investment shares you are expected to receive $44 in your first year as a dividend.
          Dividend Amount
          Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
          • Paying below low risk savings rate. (3%)
          • Paying below the markets top dividend payers. (4.92%)
          Historical dividend yield
          It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

          We also check to see if the dividend has increased in the past 10 years.
          • Dividends per share have been volatile in the past 10 (annual drop of over 10%).
          • Dividends per share have increased over the past 10 years.
          Current Payout to shareholders
          What portion of Australian Ethical Investment's earnings are paid to the shareholders as a dividend.
          • Dividends paid are covered by net profit (1.1x coverage).
          Future Payout to shareholders
          • Insufficient estimate data to determine if a dividend will be paid in 3 years.
          X
          Income/ dividend checks
          We assess Australian Ethical Investment's dividend by checking for:
          1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
          2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
          3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
          4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
          5. How sustainable is the dividend, can Australian Ethical Investment afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
          6. Australian Ethical Investment has a total score of 2/6, see the detailed checks below.


          Full details on the Dividends part of the Simply Wall St company analysis model.

          Management

           What is the CEO of Australian Ethical Investment's salary, the management and board of directors tenure and is there insider trading?

          Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
          CEO
          Phil Vernon, image provided by Google.
          Phil Vernon
          COMPENSATION$674,259
          CEO Bio

          Mr. Phillip A. Vernon, also known as Phil, BEc, MCom, MBA, FCPA, FAICD is the Managing Director at Australian Ethical Investment Ltd. since July 2010 and serves as the Chief Executive Officer since December 2009 and Executive Director since July 27, 2010. Mr. Vernon is also a Director of Australian Ethical Superannuation Pty Limited and Australian Ethical Foundation Pty Limited. He is a Director of the Responsible Investment Association of Australia. Mr. Vernon is also a Director of Environmental Foundation and Beyond Zero Emissions. He is a Fellow of the Australian Institute of Company Directors and the Australian Society of Certified Practicing Accountants. Mr. Vernon has a vast experience in financial services covering funds management, superannuation, corporate governance and industry regulation. He holds the FCPA and FAICD designations. Mr. Vernon also holds B.Ec., M.Com., and M.B.A. degrees.

          CEO Compensation
          • CEO's compensation has been consistent with company performance over the past year.
          • CEO's compensation appears reasonable.
          Management Team Tenure

          Average tenure of the Australian Ethical Investment management team:

          Management tenure
          3.3 years
          • The tenure for the Australian Ethical Investment management team is about average.
          Management Team

          Phil Vernon

          TITLE
          CEO, MD & Executive Director
          COMPENSATION
          $674,259

          Mark Shanahan

          TITLE
          CFO, COO & CTO
          COMPENSATION
          $280,488

          David Macri

          TITLE
          Chief Investment Officer
          COMPENSATION
          $513,205

          Tom May

          TITLE
          General Counsel & Company Secretary
          COMPENSATION
          $276,376

          Karen Hughes

          TITLE
          Head of Risk & Compliance
          COMPENSATION
          $45,867

          Stuart Palmer

          TITLE
          Head of Ethics
          COMPENSATION
          $307,379
          Board of Directors Tenure

          Average tenure of the Australian Ethical Investment board of directors:

          Board tenure
          5 years
          • The tenure for the Australian Ethical Investment board of directors is about average.
          Board of Directors

          Steve Gibbs

          TITLE
          Chairman
          COMPENSATION
          $108,625

          Phil Vernon

          TITLE
          CEO, MD & Executive Director
          COMPENSATION
          $674,259

          Kate Greenhill

          TITLE
          Non-Executive Director
          COMPENSATION
          $90,625

          Mara Bun

          TITLE
          Non-Executive Director
          COMPENSATION
          $78,625
          Recent Insider Trading
          Who owns this company?
          X
          Management checks
          We assess Australian Ethical Investment's management by checking for:
          1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
          2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
          3. Is the average tenure of the management team less than 2 years? (1 check)
          4. Is the average tenure of the board of directors team less than 3 years? (1 check)
          5. Australian Ethical Investment has a total score of 6/6, this is not included on the snowflake, see the detailed checks below.


          Note: We use the top 6 management executives and board members in our calculations.

          Note 2: Insider trading include any internal stakeholders and these transactions.

          Full details on the Management part of the Simply Wall St company analysis model.

          Company News

          Company Info

          Description

          Australian Ethical Investment Ltd is a publicly owned investment manager. The firm launches and manages equity, fixed income, and balanced mutual funds for its clients. It invests in the public equity and fixed income markets across the globe. The firm invests in clean energy, sustainable products, medical solutions, innovative technology, responsible banking, healthcare, recycling, energy efficiency, education, and aged care. It does not invest in coal, coal seam gas, oil, weapons, tobacco, logging, exploitation, gambling, human rights abuses, and harmful products. Australian Ethical Investment Ltd was founded in 1986 and is based in Sydney, Australia.

          Details
          Name:Australian Ethical Investment Ltd
          Ticker:AEF
          Exchange:ASX
          Founded:1986
          Market Cap:$137 million
          Website:http://www.australianethical.com.au
          Listings
          Map

          130 Pitt Street, Sydney, 2000, Australia

          Number of employees
          Street

          Current staff
          Staff numbers
          30
          Australian Ethical Investment employees.
          Industry
          Industry:Asset Management and Custody Banks
          Sector:Diversified Financials