Want To Invest In Macquarie Group Limited (ASX:MQG)? Here's How It Performed Lately

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 Macquarie Group Limited (ASX:MQG) useful as an attempt to give more color around how Macquarie Group is currently performing. View out our latest analysis for Macquarie Group

Were MQG's earnings stronger than its past performances and the industry?

MQG's trailing twelve-month earnings (from 31 March 2018) of AU$2.45b has jumped 15.77% 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 19.27%, indicating the rate at which MQG is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and whether the whole industry is feeling the heat.

Over the past few years, revenue growth has failed to keep up which suggests that Macquarie Group’s bottom line has been propelled by unmaintainable cost-reductions. Inspecting growth from a sector-level, the Australian capital markets industry has been growing, albeit, at a subdued single-digit rate of 9.16% in the prior twelve months, and a substantial 19.41% over the past five. This shows that whatever tailwind the industry is benefiting from, Macquarie Group is able to leverage this to its advantage.

In terms of returns from investment, Macquarie Group has not invested its equity funds well, leading to a 14.20% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 1.28% is below the AU Capital Markets industry of 6.10%, indicating Macquarie Group's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Macquarie Group’s debt level, has increased over the past 3 years from 2.85% to 3.28%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 620.64% to 488.65% over the past 5 years.

What does this mean?

Though Macquarie Group's past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Macquarie Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Macquarie Group to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for MQG’s future growth? Take a look at our free research report of analyst consensus for MQG’s outlook.
2. Financial Health: Is MQG’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.
3. 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.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.