Navitas Limited reports profit fall – Are the shares ex-growth?

Navitas Limited (ASX:NVT) has reported muted growth.

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

What: Leading education business Navitas Limited (ASX: NVT) has this morning reported an uninspiring set of full year results and the outlook for the current financial year isn't much better.

The Results: While the statutory profit growth was eye catching at 25.4%, the adjusted result was muted.

Here are the key numbers investors need to know –

  • Operating revenue increased $30.3 million to $1 billion with the SAE division (a global media technology training institute) responsible for the majority of the revenue growth
  • Underlying earnings before interest, tax and amortisation (EBITA) fell around $2 million to $133.8 million
  • Underlying net profit after tax (NPAT) attributable to shareholders slipped by $1.3 million to $90.8 million
  • A final, fully franked dividend of 9.9 cents per share (cps) has been declared. The shares will trade ex-dividend on August 31, with payment scheduled for September 15
  • Coupled with an interim dividend of 9.6 cps, shareholders will have received fully franked dividends totalling 19.5 cps in respect of financial year 2016
  • Net debt increased year on year from $36 million to $56 million

What Now: It will be interesting to see how the share price of Navitas reacts today considering the stock is up around 43% over the past year.

In its outlook statement for 2017, the following guidance was provided –

  • Solid underlying organic revenue growth expected across all businesses
  • Final financial impact of closing University Partnerships colleges in H1 17
  • FY17 EBITDA result expected to remain broadly in line with FY16

Based on Monday's closing price of $5.89, Navitas is trading on a price-to-earnings (PE) multiple and yield of 24.5x and 3.3% respectively.

Those numbers suggest that the market still has Navitas priced as a growth stock – that's not an unreasonable assumption based on the long term sectoral tailwind which education services should enjoy.

However, for companies trading on high PE multiples such as Navitas and other growth stocks like Domino's Pizza Enterprises Ltd (ASX: DMP) and Cochlear Limited (ASX: COH) failing to meet investor expectations (irrespective of achieving high growth) is likely to lead the market to be harsh in its re-assessment of fair value.

With many companies trading on very high PEs, investors will need to be particularly vigilant this reporting season.

Motley Fool contributor Tim McArthur has no position in any 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 Bruce Jackson.

More on ⏸️ Investing

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
Technology Shares

Joining the revolution: How I'd invest in ASX AI shares right now

Advances in artificial intelligence (AI) could usher in a new industrial revolution. Here’s how you can invest in it.

Read more »

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »