Last week was a dramatic week for some of the most anticipated full year reports, with many big names falling behind expectations. Here are some of the big movers you should know about.

Costa Group Holdings (ASX: CGC)

The market was unambiguously disappointed by Costa Group's half year performance, slashing the Costa Group share price down by 22% to $2.97 (at the time of writing). With its shares trading at a price-to-earnings (P/E) of 29 prior to the announcement, the group's revenue growth of 11.8% and net profit after tax (NPAT) growth of 5.5% left much to be desired. The company's underlying figures, not accounting for asset revaluations, were even worse – EBITDA-SL fell 8.4%, whilst NPAT-SL fell by 15%.

Costa Group's success in the tomatoes and citrus segments were offset by wholesale pricing issues in mushrooms and avocados, and its African Blue subsidiary significantly underperformed expectations, despite harvest volumes being up 20% on the prior year. The outlook for Costa remains uncertain, and it's debated whether this half year's poor performance is due to unfortunate circumstance or reflective of a larger, fundamental issue. Management has not given earnings guidance for the full calendar year 2019.

A2 Milk Company Ltd (ASX: A2M)

Shareholders in this market fared no better, despite the company reporting growing revenues by 41.4% to NZ$1304.5 million, and net profit by 47% to NZ$413.6 million. But with the a2 Milk share price down more than 15% since the announcement, it appears this growth was not enough to outpace the market's lofty expectations.

Whilst these were solid overall results, they are ultimately a lagging indicator of the company's prospects, and investors are beginning to see the limitations of its growth. a2 Milk has faced difficulty in the UK market, and an escalating trade war could potentially slow down the infant formula machine that drives 81% of the company's revenues. A marketing investment of NZ$135.3 million (or 10.4% of revenues) is expected in FY20, but even then, investors don't appear too confident that a2 Milk will be able to sustain the phenomenal growth it has had in the past.

BWX Limited (ASX: BWX)

One company which came as a pleasant surprise was BWX, with the company's new CEO Dave Fenlon optimistic about its "clear strategic roadmap to deliver a turnaround performance". Whilst the group's full year revenue of $149.5 million was up less than 0.01% on FY18, the second half of the year did highlight a tremendous 19.9% improvement on 1H19. Given the company's tumultuous year of management fiascos, it came as little surprise that BWX's underlying net profit after tax of $11 million was down 55% on the prior period.

The BWX share price is up more than 21% to $2.89 since the announcement last Friday, with the market ecstatic about the growth opportunities in FY20. BWX forecasts revenue growth of 20–25% and EBITDA growth of 25-35% in FY20; the Andalou Naturals brand leading the way with its recent success in both the USA Whole Foods Market and Priceline Australia.

The post Week 3 earnings recap: The ASX winners and losers you should know about appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong owns shares of A2 Milk and Costa Group Holdings. The Motley Fool Australia owns shares of and has recommended BWX Limited and COSTA GRP FPO. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Goodman Group (ASX: GMG) share price closed at $15.50 on Friday, up 4.38% off the back of its FY19 results, which brings its year-to-date growth to 38% amid a year of uncertain property prices. Goodman Group owns a portfolio of commercial and industrial property, having a stake in over 13 different countries through its partnerships.

Results

Investors were certainly expecting a lot from the company, with its shares trading at a price-to-earnings (P/E) of 26x prior to today's announcement. They were not disappointed with the company's key metrics.

• Revenue of $1718.6 million, up 8.5% on FY18
• Operating earnings per share (eps) of 51.6 cents, up 10.5% on FY18
• Statutory profit of $1627.9 million (including $872million of revaluation gains), up 47.6% on FY18

The company was pleased to hit its main financial metrics, delivering operating profit growth of 11.4% and increasing their dividend by 7%. Through their partnerships, Goodman Group raised its external assets under management (AUM) up 22% to $42.9 billion, bringing in management income of $469.7 million (48% higher than FY18).

How have Goodman delivered despite a bad year in property?

At the start of 2019, it was speculated that property prices were to fall by as much as 20%. Whilst the share price in companies such as Lendlease Group (ASX: LLC) took large losses, Goodman Group and industry peer Mirvac Group (ASX: MGR) managed to sustain modest gains. This highlights the robust nature of industrial and commercial real estate, where the weighted average lease expiry is significantly higher than residential properties. Along with an astonishing 98% occupancy rate, Goodman Group's recurring revenues could make it one of the best stocks to gain exposure to real estate.

Gearing and financing

In a capital intensive industry such as real estate, Goodman Group actually stands out as a company with a lower gearing ratio (proportion of borrowings over total assets). Although the gearing ratio increased from 5.1 to 9.7, it still remains well below the industry average of 20-25%.

Outlook and potential risks

After a solid performance, the Group is still forecasting further growth of 10.4% in operating profit. This positive outlook, however, does come with an array of potential risks. Whilst commercial property remains stalwart in volatile markets, it is by no means a defensive stock. An economic downturn could cause occupants to default on their contracts, devastating Goodman Group's earnings. It's also important to note that approximately $207 million of this years earnings growth was the result of record low interest rates – and so any adverse movements could produce a similarly negative effect.  

The post Goodman Group delivers strong result to cement its premium valuation appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Vocus Group Limited (ASX: VOC) share price lifted 10% to $3.20 on Thursday, before pulling back slightly in today's trade to close at $3.18 per share.

The market responded positively yesterday after the telecommunications provider announced a spot of good news amidst a year of disappointment.

Could this be the end of its troubles?

In May this year, Vocus shareholders experienced some relief when the company was the target of a bidding war. AGL Energy Ltd (ASX: AGL) signalled its interest in the telecommunications space but was unable to an exclusive due diligence period with its tentative offer. It did, however, spark the interest of Swedish private equity firm EQT, which proposed an indicative offer of $5.25 per share – valuing Vocus at $3.3 billion valuation. Although the Vocus share price raced up as much as 20% to its $4.90 highs, EQT backed down from negotiations less than a week into its due diligence period, making it the fourth failed acquisition attempt in the last 2 years. Unsurprisingly, the Vocus share price fell as much as 37% to $2.97.

Results

The company yesterday reported "results in line with guidance across all key metrics", with highlights in New Zealand performance and retail business unit margin improvements. However, a closer look at these figures reveal much left to be desired – with revenues stagnating at +0.4% and EBITDA falling by 3% to $349.1 million. Furthermore, increased expenses in employee benefits and financing costs saw the group's net profit after tax fall to just $34 million, or a decrease of 44% on their FY18 figures.

Outlook

Despite this poor performance, the market was clearly expecting worse. In its investor presentation, the Vocus management team has described FY19 as a "foundational year" for its 3 year turnaround plan, and a sign that its current strategy is on track. The company has also adjusted its previous FY20 earnings guidance from underlying EBITDA of $350–$370million to $359–$379million, or growth of between 0%–5% on current year figures.

Foolish takeaway

Whilst it may be tempting for investors to see the potential upside, I would be staying clear of Vocus shares until the company can demonstrate its ability to turnaround not only its own operations, but find a solution for the headwinds they are facing in the telecommunications industry.

The post Vocus share price in focus as it hits FY19 earnings guidance appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

With earnings season in full swing, it's easy to get lost in the sea of information being released every day. Here are 3 companies that either won big, or lost big, in week 2.

CSL Limited (ASX: CSL)

The pharmaceutical juggernaut CSL continues to dazzle investors with its impressive growth. The company reported statutory net profit after tax of $1.9 billion, representing 17% growth even when compared against a strong prior period. Its highlighted exceptional growth in the immunoglobulin portfolio, with Privigen and Hizentra sales up 23% and 22%, respectively.

CEO Paul Perrault was pleased with the consistent result, anticipating growth in net profit of between 7%–10% in FY20. But with the CSL share price zooming to an all-time high of $239 – at a 40 times price-to-earnings valuation – I don't think there is enough potential upside to justify a buy.

Domain Holdings Australia Ltd (ASX: DHG)

Another company in focus last week was Domain Holdings; in February, a weakening property market forced Domain to write off $178.8 million in goodwill impairments. This inevitably impacted its statutory results, which showed a net loss after tax of $137.6 million. Their underlying results weren't much better, showing declines of 6.1% in revenue and 29.3% in net profit after tax.

However, it appeared that the market was expecting far worse, with the Domain share price climbing 14% since the announcement. Investors may be optimistic that the large write offs this year could lead to higher profit figures in the coming years as property prices recover. Personally, I'd favour industry peer REA Group Ltd (ASX: REA) ahead of Domain, which reported 8% growth in earnings despite challenging market conditions. Domain expects lower listings in the first half of FY20, with the company yet to provide any earnings guidance.

Blackmores Limited (ASX: BKL)

Perhaps one of the most disappointing earnings results this year has been Blackmores, with its share price plummeting 22% since the announcement. Its full-year net profit after tax of $53 million was down 24% on its FY18 figures. The poor performance of their second half is highlighted when compared to FY19H1 results, with net profit after tax 44% lower in FY19H2. The company has blamed changes in e-commerce laws leading to a 15% reduction in sales from China.

It appears the only real highlight was in its Asia ex-China sales, which grew 30% to contribute a meaningful $107 million in revenue. Although the company has a strong brand, its outlook remains bleak. Issues in China are expected to persist into the first half of 2020, and net profit is expected to be below its prior corresponding period.

The post Week 2 earnings recap: the ASX winners and losers you should know about appeared first on The Motley Fool Australia.

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Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Aristocrat Leisure Limited (ASX: ALL) is a global gaming provider and game publisher, and the largest Australian gaming company with a current market capitalisation of $18.9 billion. Its land-based operations such as pokies and slot machines can be found in more than 90 countries, while its recently expanded Digital segment attracts an aggregated 8 million daily active users (DAU). The Aristocrat Leisure group earns 60% of revenues from the United States (US), and reports in US dollars.

Teaching an old dog new tricks

After listing on the ASX in 1996, Aristocrat Leisure initially found its success in the manufacturing of gambling machines. Amid fears of tightening regulation and the ethical scrutiny placed on gambling in recent years, it decided to diversify its operations into the lucrative mobile gaming industry.

In 2017, it acquired the Israeli based studio Plarium, shortly followed by the Seattle-based gaming company Big Fish Games. These short years have seen unprecedented growth in the digital gaming segment, which now contributes to 39% of total group revenue. With many works in the pipeline, and collaborations with huge brands such as Disney, Aristocrat Leisure is well on its way to becoming a powerhouse in the US$32 billion mobile gaming industry.

Recent performance

Driven by these strategic investments, the group achieved an extraordinary result for the 6 months ended 31 March 2019. Total revenues grew by a staggering 35% to US$2.1 billion, with net profit after tax (NPAT) up 34.9% on the prior corresponding period. Despite an expectedly slower demand for gambling products in the Australia and New Zealand region, its profits were more than compensated by a record 17% growth in earnings from North America.

The importance of the company's international earnings are further emphasised when its reported operating revenue growth of 29.8% is compared to a constant currency growth of 20.8% – highlighting the role of currency diversification. Even so, both of these figures are dwarfed by the staggering 37% revenue growth in its Digital segment, thanks to the full year contribution from its Plarium and Big Fish Games acquisitions.

Foolish takeaway

In my opinion, the company's timely acquisitions and diversification have allowed the gaming giant to remain relevant in a rapidly changing industry. Although the company's valuation appears stretched at a price-to-earnings ratio of 34, the company's sound strategy and relentless investment into gaming technology could fuel its success for years to come.

So far in 2019, the Aristocrat Leisure share price is up 40%.

The post Why Aristocrat could become one of the fastest growing ASX blue chips appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Australia's Big 4 – the Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corporation (ASX: WBC), National Australia Bank Ltd (ASX: NAB), and the Australia and New Zealand Banking Group (ASX: ANZ)  – dominate not only the banking industry, but also the ASX, being the 1^st, 4^th, 5^th and 6^th largest companies on the ASX by market capitalisation.

It's easy to see why. Investors love to stick with what they know, and just about every Australian can recognise these banks' iconic logos wherever they go. So, with impressive fully franked dividends ranging from 6.3% to 6.7% (market average of 4.2%), why do I think bank shares are such a terrible option for most beginning investors?

Changing our perspective on risk

 "I'm just thinking of buying bank shares because I don't want anything too risky"

Whilst it's unlikely that our banks will be going out of business any time soon, it doesn't mean that your investment will be immune to volatility. Banks exemplify the definition of a cyclical stock – as the economy slows and loans begin to decrease, it doesn't take long before dividends are cut and the share price begins to dive. During the GFC, the Commonwealth Bank share price fell as much as 57%, debunking the so-called 'safe' status that new investors tend to give reputable companies. The impact of record low rates and the banking royal commission continues to put pressure on the banks, making it harder for them to issue loans and thus squeezing their profit margins.

Another good reason to steer clear of our banks is that you probably already own them. The Commonwealth Bank, Westpac, and ANZ are the top three most commonly owned shares by superannuation funds, with NAB following closely behind. With this much exposure being had through superannuation holdings, most working Australians would be better off seeking growth and diversification from different assets.

So, what are the alternatives?

I'd say the biggest problem for investors starting out is diversification. General wisdom suggests that investors get to 10 stocks as soon as they can so that any adverse event affecting any one individual stock won't destroy your portfolio.

Exchange-Traded Funds, or ETFs, are a fantastic way to get instant diversification across many companies without being swamped by brokerage fees. Instead of buying an individual company, putting money into an ETF means that a fund manager will automatically allocate your investment across a range of opportunities. I'd recommend the Betashares Australia 200 ETF (ASX: A200) for investors seeking local exposure, with a management fee of only 0.07%. Investors seeking exposure to established US companies such as Microsoft, Apple and Amazon can achieve this with the iShares S&P 500 ETF (ASX: IVV).

The post Why I think beginner investors should avoid the Big 4 banks appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Altium Limited (ASX: ALU) share price is up over 70% in 6 months, but is there enough growth left to justify its lofty valuation?

What does Altium do?

Altium Limited is market leading provider of printed circuit board (PCB) design software, which is a key component used in all electronic devices ranging from mobile phones to automobiles and aeroplanes. Altium's flagship product Altium Designer allows engineers and creators to design and customise their own printed circuit boards (PCBs), with high profile customers such as Audi, Tesla, Microsoft and Google.

Recent performance

The Altium share price jumped more than 20% on announcement of the company's "outstanding" half-year performance. For the half-year ended December 2018, Altium posted an increase in total revenue of 24% to US$78.1 million, along with an impressive 58% growth in net profit after tax (NPAT) to US$23.4 million. Other key highlights showed a strengthening earnings before tax, interest, depreciation and amortisation (EBTIDA) margin of 36.3%, compared to a previous 30%, and a healthy increase in operating cash flow to US$26.8 million. Altium's Boards and Systems segment continued to dominate the company's product mix, with Altium Designer 19 licenses and subscriptions increasing by 23% and 12%, respectively. Since the announcement, the Altium share price has continued to storm higher, reaching a record high of $36.90 just last week.

What's the outlook for Altium?

Off the back of its strong first-half performance, Altium CEO Aram Mirkazemi stated the company is "firmly on track" to achieve its 2020 revenue target of US$200 million, while maintaining an EBITDA margin of 35% or higher. It continually wins market share, hoping to reach over 30% market share by 2020 and over 45% by 2023.

At its current price-to-earning (P/E) ratio of over 64, it's hard to make a case for Altium Limited shares to be good value. On the other hand, bullish analysts argue that the P/E method may not be a reliable valuation technique for a fast-growing tech company; other high P/E software-as-a-service (SaaS) companies on the ASX have also managed to make tremendous gains in 2019, such as Xero Limited (ASX: XRO) and Appen Limited (ASX: APX), which are both up 52% and 137%, respectively. As a software distributor, Altium can achieve revenue and customer growth on an enormous scale without massively increasing their costs. It also has no debt, which curbs the issue of financial risk that plagues many up and coming tech companies.

Foolish takeaway

As more and more enthusiasts embrace the culture of build-it-yourself computers and DIY electronics, creators are looking for a much more personalised experienced. Altium may be prime position to benefit as people find new and creative ways to utilise custom PCBs in their products. So far in 2019, the market seems to agree.

All eyes will certainly be on the Altium share price as it prepares to release its full FY19 results on 19 August.

The post Why the Altium share price is skyrocketing in 2019 appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Altium, Appen Ltd, and Xero. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

National Veterinary Care Ltd (ASX: NVL) is a provider of veterinary services in Australia and New Zealand. It operates a portfolio of general practice clinics, and partners with independent clinics to form a network of 98 integrated veterinary businesses. It aims to achieve growth through acquisition, as well as organic growth through business initiatives such as its 'Best for Pet' loyalty program.

Recent performance

After a difficult few months, investors in National Veterinary Care were eager to track the performance of its recent Pet Doctors acquisition in New Zealand. The Pet Doctors Group, acquired in October 2018, consists of 23 clinics and 2 training facilities, and represents NVL's largest acquisition since listing on the ASX in 2015.

In February, the company posted revenue of growth of 30% to $54.1 million for the half year, and an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $8.2 million (up 29.9% compared to FY2018H1). Despite this, net profit after tax (NPAT) was down 19.9% due to acquisition costs, as well as one-off profits reported in the prior year. Shares in NVL have remained stable since the announcement.

Growth by acquisition

One of National Veterinary Care's key growth strategies is through the acquisition and integration of veterinary clinics into its network. Despite consecutively strong periods of headline (revenue) growth, the company's shrinking EBITDA margins represent a concern to overall profitability.

While the company states the synergistic and procurement benefits from optimising economies of scale, the company's shrinking EBITDA margin (underlying) from 15.7% to 15% suggest that they continue to face challenges in integrating these businesses. Organic revenue growth (on a like-for-like basis) for the period of 2.9% also appears to be on the lower end of expectations.     

Outlook

National Veterinary Care expects to achieve an underlying revenue growth of 40% above their FY2018 figures and maintain underlying EBITDA margins of between 14.5%–15%. The Best for Pet Wellness Program has been implemented in 81 clinics, and aims to bring in an additional 8,000 members (35% growth) by the end of the calendar year. If the company is able to achieve this growth, it can provide a means to distinguish itself from competitors and strengthen the National Veterinary Care brand.

Foolish takeaway

At the current price-to-earnings multiple of 18, it's easy to see why some investors consider the growth potential in National Veterinary Care to be good value. The main concern is whether its recent acquisitions will bring in the expected growth to justify its cost. At this stage, I would not be a buyer of National Veterinary Limited shares until the company can show improving margins, and the synergistic benefits of these acquisitions making a material impact on earnings.

The post Is the National Veterinary Care share price in the buy zone? appeared first on The Motley Fool Australia.

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Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of NATVETCARE FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Corporate Travel Management (ASX: CTD) share price has been smashed over the last 12 months, but could it be in the buy zone?

Corporate Travel Management is a provider of cost-effective travel management solutions to the corporate market. Corporate Travel Management's tailored service and technology has allowed it to win market share in Asia, North America, Europe and the Australia/New Zealand regions.  

What went wrong?

In a scathing 176-page document released in October 2018, investment management firm Vgi Partners Ltd (ASX: VGI) claimed there were 20 "red flags" that indicated the Corporate Travel Management share price was overvalued. While many of these claims could be dismissed as immaterial, some arguments brought to light major concerns.

Among such claims were accusations of deceptive revenue recognition policies, and lack of organic growth concealed through consecutive acquisitions. The company's cash balance reporting also came under scrutiny, with Vgi Partners claiming it made "no sense" when compared to the transaction volume multiples of industry peers Flight Centre Travel Group Ltd (ASX: FLT) and HelloWorld Travel Ltd (ASX: HLO). Despite Corporate Travel Management vigorously defending itself against these claims, it did little to restore faith to the wider market. In the two weeks following the report, the Corporate Travel Management share price fell more than 30% to a 52-week low of $19.20.

Outlook

While it may be too early to call the shorters wrong, Corporate Travel Management's half-year report certainly provided a temporary relief for investors. The company achieved an underlying EBITDA (excluding acquisitions) of $64.6 million, indicating growth of 21% over the prior corresponding period. Despite lacklustre growth from North America, the company's outperformance in Asia saw total transaction value (TTV) in that region rise 60% to $1070.5 million – flowing into an adjusted EBITDA growth of 34%. Managing Director Jamie Pherous remains optimistic about the company's strategy "to build a global network" and is confident it will achieve the upper end of its full FY19 earnings guidance of $150 million (representing 20% growth on from FY18).

Is Corporate Travel Management a buy?

Although CTM shares jumped as high as $29 off the back of these fantastic results, they have since fallen back to $22. In May, one of Australia's leading brokers, Morgans, cut their CTM price target from $31.65 to $27.50, stating that the company was unlikely to beat analyst expectations. However, if the company is able to achieve its anticipated $150 million in earnings, its current share price would indicate a forward price-to-earnings ratio of 16. In light of the stellar growth opportunities available in a fragmented corporate travel market, I'd consider Corporate Travel Management to be a buy for growth-seeking investors.

The post Is the Corporate Travel share price in the buy zone? appeared first on The Motley Fool Australia.

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Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Helloworld Limited. The Motley Fool Australia owns shares of and has recommended Corporate Travel Management Limited and Flight Centre Travel Group Limited. The Motley Fool Australia has recommended Helloworld Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

oOh!Media Ltd (ASX: OML) is one of Australia's leading media agencies specialising in out of home advertising, such as billboards and digital advertising displays. It harnesses technology and data analytics to optimise audience engagement and reach, spanning a network of 30,000 locations including major highways, train stations and retail centres.

Despite growing revenues for the calendar year 2018 (CY18) by 27% to $482.6 million, investors slashed down its shares by more than 14% when the company announced its half-year report in February. Although there was strong performance its recently acquired Commute business, rampant expenditures (up 32% on CY17) and acquisition costs funded by share issues resulted in net profit after tax (NPAT) declining by 4%.

While organic revenue growth reached 10%, the cracks were starting to show in oOh!Media's core retail business. The segment represents 27.5% of the group's total revenues, and declined 2% from CY17. It's hard to make a case that this is likely to improve; in January the shopping centre giant Vicinity Centres (ASX: VCX) revalued their portfolio downwards by $37 million due to declining foot traffic.

oOh!Media's CEO Brendon Cook described 2018 as a "transformational year" as the company diversifies its earnings from retail assets. Revenues from its Qantas in-flight partnership exceeded expectations, and saw the segment lift revenue meaningfully by 23.2% to $67.8 million. The newly acquired Commute segment is also expected to make up roughly 35% of pro-forma revenues, reducing the company's reliance on retail income to 20%. Other key highlights for the company include an increase in underlying NPATA (NPAT before acquired amortisation costs) by 18% on CY17, and a 5% increase in total dividends.

The outlook for oOh!Media

The company has forecasted an underlying earnings before interest, tax, depreciation and amortisation (EBITDA) range of between $152–$162million for the full CY19, representing growth of between 35%–44% on CY18 figures. However, it appears unlikely that much of this growth will reach the bottom line, with another $55–$70 million (35%–70% increase on CY18) in capital expenditure expected.

Foolish takeaway

Even with the remarkable contribution from its Commute acquisition, tough retail trading conditions could prove disastrous for the media advertising industry. With $410 million in debt liabilities and growing costs, I'm not convinced there is enough growth to justify a buy at its current valuation.

The post Is the oOh!Media share price in the buy zone? appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia has recommended oOh!Media Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Webjet Limited (ASX: WEB) is Australia's leading online travel agency, offering flight and accommodation packages to both business (B2B) and retail consumers (B2C). After a record-breaking half-year result, we take a closer look at the company's performance to see if the share price could still be a buy.

Webjet's half-year report

The Webjet share price has soared after announcing its performance for the first half of FY19 back in February. The company reported a total transaction value (TTV) of $1.9 billion, accompanied by a 42% increase in earnings before interest, taxes, depreciation, and amortisation (EBITDA) to $58 million, and a 61% increase in net profit after tax (NPAT) to $38.3 million (before acquisition amortisation expenses).

Webjet's Managing Director John Guscic commented that the company's "increased global size and scale" were due to significant contributions from their recent acquisitions. In November last year, it raised more than $150 million from shareholders to acquire Destinations of the World (DOTW), a Dubai-based independent B2B platform. It's no doubt that the success of this acquisition has driven much of Webjet's growth in FY19, with firm forecasts for EBITDA of at least $120 million for FY19 (a 37% increase on FY18).

The outlook for Webjet

Perhaps the most prominent driver of Webjet's recent success is its B2B platform WebBeds. By providing accommodation, Webjet has leveraged its existing technology and infrastructure to deliver better packaged deals to its customers. This half has seen a 50% increase in bookings, and a 136% increase in EBITDA to $30.1 million. According to management, this only represents the beginning. Along with organic growth in the WebBeds business, the company expects its DOTW acquisition to earn an additional $40 million EBITDA through cost synergies, as well as providing access to growth opportunities in the Asia-Pacific region. If the company can achieve its "8/4/4" target (with revenue, costs, and EBITDA making up 8%, 4%, and 4% of TTV, respectively) while continuing to grow its bookings, then Webjet's current price-to-earnings ratio of 21 presents fantastic value.

Should you invest?

It's important that investors consider the volatile nature of the travel industry; Webjet's cash flows are likely to be impacted by global market conditions and economic cycles. For many years, Australians have enjoyed a higher currency to boost their purchasing power overseas. However, with the Reserve Bank of Australia's recent decision to cut rates to a record low of 1%, the impact of a weakening Australian dollar may present currency headwinds that hamper Webjet's travel business. It appears more investors are becoming more conscious of this risk, with the shares shedding almost 20% since their May highs.

Nevertheless, with a diversified income stream and a growing number of online bookings, Webjet Limited presents a high-growth opportunity for risk-tolerant investors.

The post Why the Webjet share price is up 30% in 6 months appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Webjet Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Cleanaway Waste Ltd (ASX: CWY) is Australia's leading waste management service, offering solutions to both businesses and governments as well as households. They dominate the collection and processing of waste materials, with a network of almost 4000 vehicles operating from 250 locations.

What's behind this recent surge?

The recent gains in the Cleanaway share price has undoubtedly been spurred by the company's phenomenal half year results. The six months to December 2018 saw net revenue grow by 47.4% compared to the prior corresponding period. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) and net profit after tax (NPAT) followed suit, with growth of 43.2% and 35.1%, respectively.

The strong performance across all segments has been led by contribution from its Toxfree acquisition in May 2018. In particular, its industrial and waste services saw a 129% boost in revenue, with EBIT margins strengthening from 2.6% to 5.9%. The management team reaffirmed their confidence in "delivering $35 million of synergies", with much of the benefits such as IT integration and group procurement expected to continue through FY20.

Along with Cleanaway's acquisitions, the strong performance is supported by growth in solid waste services – most noticeably the contracts won with NSW Central Coast Municipal, Coles, and the Brisbane City Council. New facilities have also been built in Western Sydney, Perth and Melbourne in order to meet demand for waste processing.

Sustainability and innovation

Changing global conditions have also allowed Cleanaway to gain a competitive advantage in their waste disposal. China's new National Sword Policy has limited the import of low-grade plastics and contaminated materials from overseas markets. Traditionally, selling waste materials to China has helped to subsidise the cost of waste processing in not only Australia, but in countries all over the world such as the United States (US), Germany and Ireland. By viewing waste as a commodity and investing in advanced waste management technologies, Cleanaway has been able to thrive by innovating their recycling and non-landfill alternatives.

Should you invest?

At the current price-to-earnings (P/E) ratio of 34, I'd say that the stock is already priced for perfection. While its Toxfree acquisition has helped to solidify Cleanaway's position as the industry leader, I'm not convinced that there is enough growth to justify the lofty premium that the Cleanaway share price currently trades on. However, Cleanaway may be of interest for investors seeking a more defensive earnings profile, as waste management is an industry that is likely to hold strong during an economic downturn.

The post Why is the Cleanaway share price up 37% in 6 months? appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

Costa Group Holdings Ltd (ASX: CGC) is Australia's leading horticulture group, with fully integrated operations in growing, packaging and marketing across five key product categories (avocados, berries, citrus, mushrooms and tomatoes).

Although its shares were trading at $8.79 in August last year, two disastrous earnings updates sent Costa Group investors into a world of hurt. Now, after a tumultuous 12 months, the Costa Group share price may be set to rebound.

What went wrong for Costa?

In January 2019, the market was unimpressed by the company's trading update – reporting flat NPAT-SL (net profit after tax, prior to movements in the value of biological assets, lease liability, and some depreciation components) growth compared to its forecasted double-digit growth. This was caused by an 'off-season' in citrus production, as well as unexpected costs from its African Blue acquisition. Despite management's best efforts to explain the 'cyclical' and not 'structural' nature of these problems, the Costa share price fell more than 30% in a single day. Nevertheless, management remained optimistic about its ability to deliver a double-digit CAGR (compound annual growth rate) over the 2017–2019 period.

Investors hoping for a quick turnaround were thoroughly disappointed. A "deteriorating operating environment" was the driver of another earnings downgrade at the company AGM on 28 May. This included summer temperatures affecting mushroom demand and pricing, delayed fruit maturity in Morocco, and a fruit fly causing 17,000 tonnes of citrus to be quarantined. Unsurprisingly, the revised NPAT-SL forecast dropped from 30% growth to a rate between 0%–16%. Costa's shares fell a further 30% on the announcement, bringing it to a 2-year low of just $3.56.

Is Costa Group a buy?

While there is no doubt that these issues present a material impact, I believe that the market has vastly overstated the effect that they will have on future earnings.

Costa's vertically integrated business commands higher margins through supply and logistics chain efficiencies. Despite a terrible year all round, its gross margin of 15.92% still outpaces the industry average of 12.06%. Costa's patented farming technologies such as automated irrigation also provide a diversified source of income through licensing and royalty fees.

Furthermore, Costa's main growth driver will be an expanding international market for Australian fruits and vegetables. Over the last year, 73% of packaged citrus products have been sold to overseas countries such as Japan, the United States, New Zealand, and China. The falling Australian dollar may also provide a favourable tailwind as Australian exports become more attractive in overseas markets.

Some investors agree, with the stock rebounding 12% in just the last 3 weeks.

Foolish takeaway

As recent events have shown, it's clear Costa operates in a medium–high risk business. However, with an abundance of growth opportunities and a 2.8% fully franked dividend, I'd consider Costa's current share price to be an attractive investment as part of a diversified portfolio.

The post Is the Costa Group share price in the buy zone? appeared first on The Motley Fool Australia.

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Motley Fool contributor Saran Likitkunawong owns shares of COSTA GRP FPO. The Motley Fool Australia owns shares of and has recommended COSTA GRP FPO. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.