When April SA (EPA:APR) released its most recent earnings update (31 December 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how April performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see APR has performed. View out our latest analysis for April
Could APR beat the long-term trend and outperform its industry?APR’s trailing twelve-month earnings (from 31 December 2017) of €39.63m has jumped 96.85% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -12.70%, indicating the rate at which APR is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at if it is only due to an industry uplift, or if April has experienced some company-specific growth.
Over the last couple of years, April top-line expansion has outpaced earnings and the growth rate of expenses. Though this has led to a margin contraction, it has cushioned April’s earnings contraction. Scanning growth from a sector-level, the FR insurance industry has been growing, albeit, at a unexciting single-digit rate of 8.88% over the previous year, and 2.51% over the previous five years. This means that any tailwind the industry is enjoying, April is capable of amplifying this to its advantage.In terms of returns from investment, April has not invested its equity funds well, leading to a 6.37% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 2.28% exceeds the FR Insurance industry of 0.95%, indicating April has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for April’s debt level, has declined over the past 3 years from 6.90% to 5.73%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 2.82% to 8.25% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be variables that are influencing the entire industry hence the high industry growth rate over the same time frame. I recommend you continue to research April to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for APR’s future growth? Take a look at our free research report of analyst consensus for APR’s outlook.
- Financial Health: Is APR’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.
- 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.