Shares in G8 Education have tumbled despite the childcare operator reporting a 68 per cent leap in full year profit.
The group, whose childcare chains including First Grammar, Headstart, and Early Learning Services, lifted net profit by 68 per cent to $88.6 million in 2015 while revenues rose 44 per cent.
But shares in the company slumped, with analysts suggesting investors were worried about where its future growth would come from.
G8 bought 44 centres in 2015, taking the total to 471 centres in Australia. It owns another 18 in Singapore.
Managing director Chris Scott said G8 wanted to maintain its double-digit earnings growth during 2016 and expected to make acquisitions worth between $50 million and $150 million.
"Our acquisition strategy continues to focus on consolidation opportunities in and around metropolitan areas where supply and demand dynamics combined with attractive pricing create opportunities for earnings accretive acquisitions," he said on Monday.
"The sector continues to exhibit high degrees of fragmentation coupled with favourable underlying fundamentals."
Shares in G8 sank 11 cents, or 3.2 per cent, to close at $3.30. The stock had been down by nearly nine per cent during the trading session.
Bell Direct equities analyst Julia Lee said while G8's earnings were in line with market expectations, investors appeared to be worried about its prospects for organic growth after relying in recent years on acquisitions.
Ms Lee said investors were questioning whether G8 could maintain its rate of acquisitions now that childcare waiting lists had shown signs of easing.
"Childcare was an attractive investment a couple of years ago when there were waiting lists of more than a year but since then there's been more competition to G8's roll-out model," she said.
"Either they have to hike up their childcare rates and pass that on (to parents) or they have to absorb some of it.
"So there's a question mark in terms of their future growth profile."
G8 FACES GROWTH QUESTIONS
* Revenue up 44pct to $706.2m
* Net profit up 68pct to $88.6m
* Final dividend nil (as it pays dividend quarterly)
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