Where Moelis & Company’s (NYSE:MC) Earnings Growth Stands Against Its Industry
Assessing Moelis & Company’s (NYSE:MC) past track record of performance is a valuable exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess MC’s recent performance announced on 30 June 2018 and evaluate these figures to its longer term trend and industry movements.
View our latest analysis for Moelis
Could MC beat the long-term trend and outperform its industry?
MC’s trailing twelve-month earnings (from 30 June 2018) of US$63.4m has increased by 6.5% compared to the previous year. However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 11.2%, indicating the rate at which MC is growing has slowed down. To understand what’s happening, let’s look at what’s occurring with margins and whether the entire industry is experiencing the hit as well.
Revenue growth over the last few years, has been positive, however, earnings growth has been lagging behind meaning Moelis has been growing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the US capital markets industry has been growing its average earnings by double-digit 21.3% over the previous twelve months, and 14.6% over the last five years. This growth is a median of profitable companies of 24 Capital Markets companies in US including Caledonia Investments, Donnelley Financial Solutions and BGC Partners. This suggests that any uplift the industry is deriving benefit from, Moelis has not been able to leverage it as much as its average peer.
In terms of returns from investment, Moelis has invested its equity funds well leading to a 41.0% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 8.7% exceeds the US Capital Markets industry of 3.3%, indicating Moelis has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Moelis’s debt level, has declined over the past 3 years from 46.5% to 33.8%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Moelis has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Moelis to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MC’s future growth? Take a look at our free research report of analyst consensus for MC’s outlook.
Financial Health: Are MC’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 editorial-team@simplywallst.com.
