The Australian Ethical (ASX:AEF) share price lower despite positive earnings guidance

The ethical investing fund has announced yet another positive earnings update.

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The Australian Ethical Investment Ltd (ASX: AEF) share price rose as high as $8.64 this morning before retreating to its current price of $7.88, down 4.95% for the session.

This comes after the company this morning announced an earnings guidance for FY21.

What did Australian Ethical announce?

The company advised that its Emerging Companies Fund has outperformed its benchmark, the S&P ASX Industrials Index over the last 12 months.

In today’s statement, Australian Ethical was pleased to reveal that the Emerging Companies Fund returned 51.1% after fees (including performance fees) for wholesale investors in FY21, compared to the benchmark which returned 33%.

Australian Ethical will earn a performance fee of 20% of the Fund’s one-year outperformance over the benchmark.

According to the announcement, this translates to a performance fee of $2.89 million.

The performance fee will result in a material lift in the company’s underlying profit after tax (UPAT), with new guidance between $10.7 million and $11.2 million for FY21. This figure represents a midpoint increase of 18% against the prior corresponding period.

Australian Ethical has 8 managed fund options for retail and wholesale investors. The Emerging Companies fund is classified as the most aggressive option with the highest risk/reward according to the company.

Australian Ethical share price in 2021

The Australian Ethical share price has been a strong performer from both year-to-date and FY21 perspectives, increasing around 60% and 26%, respectively.

Australian Ethical previously upgraded its earnings back on 27 May, where UPAT guidance was upgraded to $8.8 million – $9.3 million for FY21. Despite the positive announcement, the company’s shares would slide 3.37% on the day to $9.45.

By 10 June, Australian Ethical shares would have tumbled 27% to $7.13 since the earnings upgrade announcement.

Despite a rocky start to June, the Australian Ethical share price has bounced off lows and currently trading at $7.88.

Should you invest $1,000 in Australian Ethical right now?

Before you consider Australian Ethical, you'll want to hear this.

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Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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