Supply Network Limited (ASX:SNL): Has Recent Earnings Growth Beaten Long-Term Trend?

When Supply Network Limited's (ASX:SNL) announced its latest earnings (31 December 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Supply Network's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not SNL actually performed well. Below is a quick commentary on how I see SNL has performed. Check out our latest analysis for Supply Network

Did SNL's recent earnings growth beat the long-term trend and the industry?

To account for any quarterly or half-yearly updates, 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 blend allows me to assess many different companies in a uniform manner using new information. For Supply Network, its latest trailing-twelve-month earnings is AU$7.59M, which, in comparison to last year’s figure, has moved up by 38.58%. Given that these figures are relatively myopic, I’ve estimated an annualized five-year figure for SNL's earnings, which stands at AU$5.10M This means that, generally, Supply Network has been able to steadily improve its profits over the last few years as well.

What's the driver of this growth? Well, let’s take a look at whether it is solely a result of industry tailwinds, or if Supply Network has experienced some company-specific growth. Over the past couple of years, Supply Network expanded its bottom line faster than revenue by effectively controlling its costs. This has led to a margin expansion and profitability over time. Inspecting growth from a sector-level, the Australian retail distributors industry has been growing its average earnings by double-digit 38.63% over the prior year, and a more muted 6.55% over the past five years. This suggests that any uplift the industry is benefiting from, Supply Network has not been able to reap as much as its industry peers.

What does this mean?

Supply Network's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Supply Network to get a better picture of the stock by looking at:

1. Financial Health: Is SNL’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.
2. Valuation: What is SNL worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether SNL is currently mispriced by the market.
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.

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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.