FlexiGroup Limited's (ASX:FXL) Earnings Grew 74.10% In A Year. Was It Better Than Its Long-Term Trend?

For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at FlexiGroup Limited's (ASX:FXL) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers. See our latest analysis for FlexiGroup

Could FXL beat the long-term trend and outperform its industry?

For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique allows me to examine many different companies on a similar basis, using new information. For FlexiGroup, its latest trailing-twelve-month earnings is A$87.4M, which, relative to last year’s level, has risen by a non-trivial 74.10%. Since these figures may be somewhat myopic, I’ve created an annualized five-year value for FlexiGroup's net income, which stands at A$64.2M. This suggests that, on average, FlexiGroup has been able to consistently improve its net income over the last couple of years as well.

What's enabled this growth? Let's take a look at whether it is merely attributable to an industry uplift, or if FlexiGroup has seen some company-specific growth. The hike in earnings seems to be driven by a robust top-line increase beating its growth rate of expenses. Though this has led to a margin contraction, it has made FlexiGroup more profitable. Scanning growth from a sector-level, the Australian consumer finance industry has been growing its average earnings by double-digit 38.21% over the prior year, and 11.55% over the past half a decade. This shows that any tailwind the industry is enjoying, FlexiGroup is able to amplify this to its advantage.

What does this mean?

Though FlexiGroup'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? I recommend you continue to research FlexiGroup to get a better picture of the stock by looking at:

• 1. Future Outlook: What are well-informed industry analysts predicting for FXL’s future growth? Take a look at our free research report of analyst consensus for FXL’s outlook.
• 2. Financial Health: Is FXL’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 30 June 2017. This may not be consistent with full year annual report figures.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.