4WD parts manufacturer and retailer ARB Corporation Limited (ASX: ARB) has delivered another underwhelming result in 2015.
While revenues were up 11.1% to $333.4 million, expenses rose at a higher rate, resulting in net profit rising just 3.6%. For a company on a trailing P/E ratio of 23.3x, that's just not good enough.
Source: ARB report
And it gets back to an article we wrote back in February this year, where we rated ARB Corp as the most overrated stock on the ASX, after another underwhelming half-year financial result. Don't get me wrong though. ARB is a high-quality company – it's just way overpriced.
Over the past 2 and a half years, ARB's share price has gone virtually nowhere – tracking earnings per share growth, which has stagnated, and fallen this year for the first time from 58.7 cents per share to 57.8 cents per share. Earnings growth over the past four years has averaged just 2.7%, compared to 22% for the four years prior to that.
This year, the large fall in the value of the Australian dollar against the US dollar and Thai Baht drove input costs higher, while above average increases in some expense categories including employees, saw expenses soar.
The good news for shareholders is that the company has declared a special fully franked dividend of $1.00 to go with the 29 cents of dividend for the full year. ARB Corp also paid another $1.00 special dividend in December 2014. Additionally, ARB has maintained a pristine balance sheet with net cash of $8 million.
Foolish takeaway
While the special dividend is sure to be welcomed by shareholders, the slowdown in earnings per share growth over the past few years is a cause for concern. That looks set to continue into 2016 too. As ARB chairman Roger Brown noted in the report, "The current economic environment remains challenging".
