Measuring Magna International Inc.'s (TSX:MG) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess MG's recent performance announced on 30 June 2019 and compare these figures to its historical trend and industry movements.
Did MG's recent earnings growth beat the long-term trend and the industry?
MG's trailing twelve-month earnings (from 30 June 2019) of US$2.6b has increased by 9.0% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.8%, indicating the rate at which MG is growing has accelerated. What's the driver of this growth? Let's take a look at whether it is merely a result of industry tailwinds, or if Magna International has seen some company-specific growth.
In terms of returns from investment, Magna International has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.6% exceeds the CA Auto Components industry of 7.2%, indicating Magna International has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Magna International’s debt level, has declined over the past 3 years from 18% to 15%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 11% to 28% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Magna International gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Magna International to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MG’s future growth? Take a look at our free research report of analyst consensus for MG’s outlook.
- Financial Health: Are MG’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 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.