After reading Monadelphous Group Limited’s (ASX:MND) most recent earnings announcement (30 June 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
How MND fared against its long-term earnings performance and its industry
MND’s trailing twelve-month earnings (from 30 June 2018) of AU$71m has jumped 24% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -24%, indicating the rate at which MND is growing has accelerated. What’s the driver of this growth? Let’s see if it is only because of industry tailwinds, or if Monadelphous Group has seen some company-specific growth.
In terms of returns from investment, Monadelphous Group has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 10% exceeds the AU Construction industry of 9.3%, indicating Monadelphous Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Monadelphous Group’s debt level, has declined over the past 3 years from 37% to 24%.
What does this mean?
Though Monadelphous Group’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn’t always indicative of a continued optimistic outlook. There could be factors that are impacting the industry as a whole, hence the high industry growth rate over the same time frame. You should continue to research Monadelphous Group to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MND’s future growth? Take a look at our free research report of analyst consensus for MND’s outlook.
- Financial Health: Are MND’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 30 June 2018. This may not be consistent with full year annual report figures.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.