In this commentary, I will examine Mondi plc’s (LSE:MNDI) latest earnings update (31 December 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the forestry industry performed. As an investor, I find it beneficial to assess MNDI’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Did MNDI’s recent performance beat its trend and industry?
MNDI’s trailing twelve-month earnings (from 31 December 2019) of €812m has declined by -1.5% 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 11%, indicating the rate at which MNDI is growing has slowed down. What could be happening here? Let’s examine what’s occurring with margins and if the rest of the industry is experiencing the hit as well.
In terms of returns from investment, Mondi has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 11% exceeds the GB Forestry industry of 5.1%, indicating Mondi has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Mondi’s debt level, has increased over the past 3 years from 17% to 18%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 58% to 47% over the past 5 years.
What does this mean?
Though Mondi’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. You should continue to research Mondi to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MNDI’s future growth? Take a look at our free research report of analyst consensus for MNDI’s outlook.
- Financial Health: Are MNDI’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.
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