Measuring McGrath RentCorp’s (NasdaqGS:MGRC) 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 MGRC’s recent performance announced on 31 December 2019 and compare these figures to its historical trend and industry movements.
How Well Did MGRC Perform?
MGRC’s trailing twelve-month earnings (from 31 December 2019) of US$97m has jumped 22% 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 25%, indicating the rate at which MGRC is growing has slowed down. What could be happening here? Well, let’s examine what’s transpiring with margins and whether the whole industry is feeling the heat.
In terms of returns from investment, McGrath RentCorp has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 8.3% exceeds the US Commercial Services industry of 6.0%, indicating McGrath RentCorp has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for McGrath RentCorp’s debt level, has increased over the past 3 years from 7.5% to 12%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 76% to 46% over the past 5 years.
What does this mean?
Though McGrath RentCorp’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research McGrath RentCorp to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MGRC’s future growth? Take a look at our free research report of analyst consensus for MGRC’s outlook.
- Financial Health: Are MGRC’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 December 2019. This may not be consistent with full year annual report figures.
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.
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