AFR - what we learned from Feb 20's earnings.

A2 Milk, Crown Resorts, Domino's Pizza - What we learned from February 20's earnings

By James Thomson

Updated Feb 20, 2019 — 3.21pm,first published at 1.41pm

 

The following is list of companies that have asmaller market value than A2 Milk after it hit a record high on Wednesday:Crown Resorts, Medibank Private, Lendlease, Caltex, Orica, AMP, Coca-ColaAmatil and Seek. It's now twice as big as Flight Centre and Harvey Norman.

Not bad for a company that listed in March 2015.And pretty amazing for a business that, when it's all said and done, hasbasically found a way to repackage a commodity that has not really changed forhundreds of years.

It's a triumph of marketing and branding.

A2 Milk boss Jayne Hrdlicka runs a company thatrepackage a commodity that has not changed for hundreds of years. JoshRobenstone

A2's interim result was better than expected in several ways,including net profit rising 55.1 per cent to $152.7 million, easily aboveanalyst expectations.

But most impressive was its underlying earningsmargin rising from 32.9 per cent to 35.6 per cent, despite marketing spendingrising 75 per cent to $45.5 million.

 

This promotional spend will double again the secondhalf, as new CEO Jayne Hrdlicka looks to further build infant formula andliquid milk sales in China and the US – and keeps the momentum rolling.

The only question with this stock will bevaluation. It now trades on an earnings multiple of around 38 times.