Was April SA’s (EPA:APR) Earnings Growth Better Than The Industry’s?

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.

ENXTPA:APR Income Statement June 25th 18
ENXTPA:APR Income Statement June 25th 18
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:

  1. 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.
  2. 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.
  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 trailing twelve months from 31 December 2017. This may not be consistent with full year annual report figures.