Assessing Avation PLC’s (LSE:AVAP) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Avation is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its trade distributors industry peers. See our latest analysis for Avation
Did AVAP perform worse than its track record and industry?
For the purpose of this commentary, I like to use the ‘latest twelve-month’ data, 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 technique allows me to assess various companies on a more comparable basis, using the most relevant data points. For Avation, its most recent trailing-twelve-month earnings is US$20.63M, which, against the previous year’s figure, has fallen by -1.11%. Given that these figures may be fairly short-term thinking, I have determined an annualized five-year value for Avation’s net income, which stands at US$12.93M This means on average, Avation has been able to increase its earnings over the last few years.
What’s enabled this growth? Let’s see whether it is solely attributable to an industry uplift, or if Avation has seen some company-specific growth. In the last few years, Avation increased its bottom line faster than revenue by effectively controlling its costs. This resulted in a margin expansion and profitability over time. Inspecting growth from a sector-level, the UK trade distributors industry has been growing its average earnings by double-digit 16.77% over the past year, and 13.06% over the previous five years. This means that whatever tailwind the industry is enjoying, Avation has not been able to realize the gains unlike its industry peers.
What does this mean?
Though Avation’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I suggest you continue to research Avation to get a more holistic view of the stock by looking at:
- Financial Health: Is AVAP’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.
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.
To help readers see pass 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.