Does Think Childcare Limited’s (ASX:TNK) 16.7% EPS Growth Reflect The Long-Term Trend?

Measuring Think Childcare Limited’s (ASX:TNK) track record of past performance is a valuable exercise for investors. It allows us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess TNK’s recent performance announced on 30 June 2017 and compare these figures to its historical trend and industry movements. View our latest analysis for Think Childcare

Commentary On TNK’s Past Performance

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 allows me to analyze many different companies on a more comparable basis, using the latest information. Think Childcare’s most recent earnings is A$6M, which, in comparison to the prior year’s figure, has risen by 21.64%. Since these values may be relatively nearsighted, I have calculated an annualized five-year value for TNK’s earnings, which stands at A$3M. This shows that, generally, Think Childcare has been able to gradually grow its net income over the last few years as well.

ASX:TNK Income Statement Oct 29th 17
ASX:TNK Income Statement Oct 29th 17
How has it been able to do this? Well, let’s take a look at if it is only attributable to an industry uplift, or if Think Childcare has seen some company-specific growth. In the past few years, Think Childcare increased its bottom line faster than revenue by successfully controlling its costs. This brought about a margin expansion and profitability over time. Scanning growth from a sector-level, the Australian diversified consumer services industry has been growing, albeit, at a subdued single-digit rate of 4.00% over the past year, and a substantial 16.44% over the past couple of years. This shows that whatever recent headwind the industry is enduring, Think Childcare is relatively better-cushioned than its peers.

What does this mean?

Though Think Childcare’s past data is helpful, it is only one aspect of my investment thesis. 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 Think Childcare to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for TNK’s future growth? Take a look at our free research report of analyst consensus for TNK’s outlook.

2. Financial Health: Is TNK’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.

3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.