Improvement in profitability and outperformance against the industry can be important characteristics in a stock for some investors. Below, I will assess Apollo Global Management LLC’s (NYSE:APO) 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.
Was APO’s recent earnings decline indicative of a tough track record?APO’s trailing twelve-month earnings (from 31 March 2018) of US$386.81m has declined by -30.91% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 27.88%, indicating the rate at which APO is growing has slowed down. Why is this? Well, let’s take a look at what’s going on with margins and if the whole industry is feeling the heat.
Over the last few years, revenue growth has failed to keep up which indicates that Apollo Global Management’s bottom line has been driven by unmaintainable cost-cutting. Scanning growth from a sector-level, the US capital markets industry has been growing its average earnings by double-digit 15.34% over the prior year, and 12.05% over the past five. This growth is a median of profitable companies of 25 Capital Markets companies in US including Yintech Investment Holdings, Clarke and B. Riley Financial. This suggests that any tailwind the industry is benefiting from, Apollo Global Management has not been able to gain as much as its industry peers.In terms of returns from investment, Apollo Global Management has invested its equity funds well leading to a 33.69% return on equity (ROE), above the sensible minimum of 20%. However, its return on assets (ROA) of 5.25% is below the US Capital Markets industry of 5.35%, indicating Apollo Global Management’s are utilized less efficiently. Though, its return on capital (ROC), which also accounts for Apollo Global Management’s debt level, has increased over the past 3 years from 2.15% to 20.72%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 195.73% to 82.21% over the past 5 years.
What does this mean?
Though Apollo Global Management’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I suggest you continue to research Apollo Global Management to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for APO’s future growth? Take a look at our free research report of analyst consensus for APO’s outlook.
- Financial Health: Is APO’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.