The perfect antidote to an underwhelming earnings season fluttered onto the radar this morning as Corporate Travel Management Ltd (ASX: CTD) posted another year of gangbusters growth.
The travel services business reported a net profit of $29.1 million on revenues of $197.9 million for the full year ending June 30, 2015. The underlying profit and revenue are up 76% and 79% respectively over the prior corresponding period. Impressive.
First class
The stock has been caught in an up draught to climb 130% over the past two years as new client wins and geographic expansion combine to power a business now operating in the UK, US, Australia, China, India, France, and Singapore among others regions, which means you don't need to be a Harvard professor of geography to see it now has a genuinely global footprint.
Asia looks one powerhouse growth region given its fast-growing economies helped underlying organic earnings grow by nearly 40%, with another strong year of growth forecast the region now makes up nearly one third of group earnings.
Total full year underlying earnings were $49.1 million, up 70% over the prior year with organic growth contributing to more than half of the top-line and profit growth.
The business and its organic growth are largely sales driven as revenue growth depends on cross selling and new client account wins. On this metric one key advantage seems to be the readily sold SMART technology solution that helps Corporate Travel's clients save money on their travel costs.
The group has also been on regular shopping sprees for junior rivals over the last few years, yet remains debt free. It did issue equity in the financial year to fund its expansion into Europe in December 2014 and earnings per share (EPS) grew 48% over the year reflecting an aggressive acquisition strategy.
I expect more EPS accretive acquisitions will be on the agenda in 2016 as an impressively disciplined acquisitive growth strategy sweetens the investment case.
The global corporate travel market is large but competitive and rivals like Flight Centre Travel Group Ltd (ASX: FLT) also operate comprehensive corporate travel operations that are growing relatively quickly compared to the leisure sector.
However, for now it seems Corporate Travel is winning market share as the client-facing parts of the business continue to excel in terms of technology, account management and sales.
Outlook
The group forecast earnings growth in the range of 25%-30% for the year ahead, which would equal full year earnings of $61.3 million to $63.8 million as it attempts to leverage its growing scale and opportunities.
Often it's the businesses with simple business models executing well that deliver the most robust growth and Corporate Travel looks a nice example. Selling for $10.20 it looks a buy even though it trades on a high multiple of earnings that reflects the torrid growth and regular earnings upgrades the market has become accustomed to.
In my opinion Corporate Travel joins Magellan Financial Group Ltd (ASX: MFG) Sirtex Medical Limited (ASX: SRX) and Bellamy's Australia in posting the four strongest earnings reports this August. A little serendipity means these are three of my four largest personal holdings, however there are other stocks I am eager to add to my holdings given current valuations. Read on below to find out all about them…
