Today I will take a look at Redde plc’s (AIM:REDD) most recent earnings update (30 June 2017) and compare these latest figures against its performance over the past few years, as well as how the rest of the transportation industry performed. As an investor, I find it beneficial to assess REDD’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time. See our latest analysis for Redde
Did REDD’s recent earnings growth beat the long-term trend and the 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 analyze many different companies on a similar basis, using new information. For Redde, its most recent bottom-line (trailing twelve month) is UK£26.81M, which, in comparison to the previous year’s figure, has grown by a relatively muted 6.42%. Since these values are relatively short-term, I have estimated an annualized five-year figure for Redde’s earnings, which stands at UK£11.63M This means that, generally, Redde has been able to increasingly improve its profits over the past couple of years as well.How has it been able to do this? Let’s see if it is only owing to an industry uplift, or if Redde has experienced some company-specific growth. In the last couple of years, Redde expanded its bottom line faster than revenue by successfully controlling its costs. This has led to a margin expansion and profitability over time. Scanning growth from a sector-level, the UK transportation industry has been relatively flat in terms of earnings growth over the last few years. This means any recent headwind the industry is experiencing, Redde is relatively better-cushioned than its peers.
What does this mean?
While past data is useful, it 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 recommend you continue to research Redde to get a more holistic view of the stock by looking at:
- 1. Future Outlook: What are well-informed industry analysts predicting for REDD’s future growth? Take a look at our free research report of analyst consensus for REDD’s outlook.
- 2. Financial Health: Is REDD’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.