When Do Company Earnings Go Up?
As investors, we usually try to get a feel for the future earnings of the company we invest in.
If we can’t predict future earnings, we can at least find out how a company plans to increase its earnings. There are basically several ways:
1. Expand into new markets (eg new country)
2. Sell more of its products in existing markets
3. Coming out with new products
4. Cut costs
5. Turn around, close or sell off a losing operation
As Peter Lynch says, the word most frequently seen with “earnings” is “surprise”. The truth is that we do not need to predict earnings to be a successful investor.
If you do not know already, check to see how your company plans to increase its earnings. Keep an eye out from time to time to see if such plans are working out.
A company which I follow more closely is AMMB Holdings. It announced its half-yearly results couple of days ago.
- Decent loan growth of 6.1% during the 6 months period (or 9.2% yoy)
- Cost-Income Ratio of 40% is substantially down from last couple of years
- Net NPL ratio of 2.2%
- NTA / Total Assets Ratio of 8.0% is super strong by any global standards
- AMMB is raising its full year Net Profit guidance now to RM920-950 million for its FY2010
AMMB’s management has told us what they are doing to improve their business and so far things are on track. The story in the banking sector reinforces what they are saying.
Even when AMMB share price nears RM5.00 (PE of around 15x), I’m wouldn’t be too quick to cash in just yet because its earnings growth story is very much in tact. There’s talk of a decent dividend payout policy… certainly the bank has more than enough capital for this.
AMMB’s Quarterly Press Release is always worth a read. You can download here.
