Will AA PLC soar higher than Standard Chartered PLC and Legal & General Group Plc after results?

Could the AA PLC (LON:AA) (AA.L) share price outperform peers such as Standard Chartered PLC (LON:STAN) (STAN.L) and Legal & General Group Plc (LON:LGEN) (LGEN.L)?

AA share price
AA share price

The AA PLC (LON:AA) (AA.L) share price has risen by as much as 6% today after the company released results for the year to 31 January 2018.

They show a performance that is in line with expectations, with trading revenue rising by 2%. Although trading EBITDA moved 3% lower to £391 million, this was in line with guidance in what was a challenging year for the business.

Weather conditions were difficult during the year. However, the company was able to grow new memberships in its Roadside division by 7%, with retention broadly flat. Paid membership, though, was 1% down due to the discontinuation of the insurance free-to-paid channel.

Insurance revenue grew by 11% to £145 million, which reflects the growth in the in-house underwriter to £12 million. This helped to drive the 6% growth in broker motor policies. Average income per motor and home policy increased by 6% due to a renewed focus on more profitable products.

In the last year the AA share price has fallen by 56%. This is a worse performance than financial services sector peers such as Standard Chartered PLC (LON:STAN) (STAN.L) and Legal & General Group Plc (LON:LGEN) (LGEN.L). The Standard Chartered share price is up 3%, while the Legal & General share price has moved 6% higher in the same time period.

In my view, the AA share price could deliver a turnaround over the medium term. Sure, it has experienced a difficult 12-month period. However, under its new strategy it appears to be making progress and could deliver improving financial performance in future.

De-levering the business could help to reduce its overall risk in my view. With the company having had its Class A notes’ investment grade status reaffirmed by S&P, it may be able to deliver a more resilient performance in future. Therefore, on a PE ratio of around 8, I feel it has investment appeal.

About Robert Stephens 3137 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email info@investomania.co.uk or use one of the other contact methods available on the 'Contact Us' page