For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on MEDIACAP SA (WSE:MCP) useful as an attempt to give more color around how MEDIACAP is currently performing. View out our latest analysis for MEDIACAP
Commentary On MCP’s Past Performance
MCP’s trailing twelve-month earnings (from 31 March 2018) of zł1.63m has declined by -44.89% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 24.02%, indicating the rate at which MCP is growing has slowed down. Why could this be happening? Well, let’s look at what’s transpiring with margins and whether the rest of the industry is facing the same headwind.
Over the last couple of years, revenue growth has failed to keep up which suggests that MEDIACAP’s bottom line has been propelled by unsustainable cost-cutting. Eyeballing growth from a sector-level, the PL media industry has been growing, albeit, at a muted single-digit rate of 8.47% in the previous twelve months, and a substantial 19.16% over the past five. This suggests that any tailwind the industry is benefiting from, MEDIACAP has not been able to gain as much as its industry peers.
In terms of returns from investment, MEDIACAP has not invested its equity funds well, leading to a 10.04% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.89% is below the PL Media industry of 9.30%, indicating MEDIACAP’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for MEDIACAP’s debt level, has declined over the past 3 years from 24.28% to 12.66%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 4.21% to 15.60% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that face an extended period of reduction in earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and expansion. I recommend you continue to research MEDIACAP to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MCP’s future growth? Take a look at our free research report of analyst consensus for MCP’s outlook.
- Financial Health: Is MCP’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 31 March 2018. This may not be consistent with full year annual report figures.
To help readers see pass 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.