Why the Goodman Group share price is up 28% in the past year

The Goodman Group (ASX: GMG) share price continued its ascent in 2018, up 28% over the past year. The Group’s strong financial performance over a prolonged period has continued to impress investors.

Goodman Group is a global industrial property group which owns, develops and manages industrial real estate. It holds $39.6 billion in total assets under management with $3.6 billion of development in the pipeline.

The Group aims to invest and develop in quality assets located in major urban centres. The rationale is that businesses (i.e. Goodman’s customers) generate supply chain efficiencies by being located closer to their customers. Businesses are continuing to invest in improving their supply chains, which has driven demand for Goodman Group’s property portfolio. Supply of prime industrial real estate is naturally limited, too.

One business known for its supply chain management is Amazon. Funnily, Amazon is Goodman Group’s biggest single customer, accounting for 4.5% of net income on a look-through basis.

The numbers have been good for Goodman Group over the years, showing compounded annual operating profit growth of 8.9% since FY14, while decreasing its gearing from 19.5% to 5.1% over the same period.

The first quarter of the 2019 financial year was also positive. About the results, Goodman Group CEO, Greg Goodman said, “With the Group’s portfolio located where our customers want to be, we are seeing consistently high occupancy, increased rental growth, strong demand for new product and higher valuations in our markets.”

Motey Fool contributor Cale Kalinowski 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.

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