Assessing Objective Corporation Limited’s (ASX:OCL) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess OCL’s recent performance announced on 30 June 2017 and evaluate these figures to its longer term trend and industry movements. See our latest analysis for Objective

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

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 blend allows me to assess many different companies in a uniform manner using the most relevant data points. For Objective, its latest earnings (trailing twelve month) is A$8.2M, which, relative to the prior year’s level, has jumped by a significant 55.84%. Given that these values may be somewhat short-term, I’ve calculated an annualized five-year value for Objective’s earnings, which stands at A$4.9M. This means on average, Objective has been able to consistently improve its net income over the past couple of years as well.

What’s enabled this growth? Let’s take a look at if it is only due to industry tailwinds, or if Objective has seen some company-specific growth. Over the past couple of years, Objective increased its bottom line faster than revenue by effectively controlling its costs. This has caused a margin expansion and profitability over time. Looking at growth from a sector-level, the Australian software industry has been growing its average earnings by double-digit 15.33% over the past year, and 15.63% over the past five. This means that any tailwind the industry is deriving benefit from, Objective is able to amplify this to its advantage.

What does this mean?

Though Objective’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 suggest you continue to research Objective to get a better picture of the stock by looking at:

1. Financial Health: Is OCL’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 OCL 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 OCL 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 30 June 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.