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 Mangata Holding SA (WSE:MGT) useful as an attempt to give more color around how Mangata Holding is currently performing.
How MGT fared against its long-term earnings performance and its industryMGT’s trailing twelve-month earnings (from 31 March 2018) of zł43.84m has jumped 10.39% 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 10.84%, indicating the rate at which MGT is growing has slowed down. What could be happening here? Well, let’s take a look at what’s transpiring with margins and if the entire industry is facing the same headwind.
Revenue growth in the past few years, has been positive, however, earnings growth has not been able to catch up, meaning Mangata Holding has been ramping up its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the PL machinery industry has been enduring some headwinds over the past couple of years, leading to an average earnings drop of -4.35% in the most recent year. This growth is a median of profitable companies of 11 Machinery companies in PL including Famur, Newag and Aztec International. This shows that any recent headwind the industry is facing, Mangata Holding is less exposed compared to its peers.In terms of returns from investment, Mangata Holding has fallen short of achieving a 20% return on equity (ROE), recording 10.08% instead. However, its return on assets (ROA) of 6.40% exceeds the PL Machinery industry of 3.88%, indicating Mangata Holding has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Mangata Holding’s debt level, has declined over the past 3 years from 14.27% to 9.45%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Mangata Holding has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Mangata Holding to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MGT’s future growth? Take a look at our free research report of analyst consensus for MGT’s outlook.
- Financial Health: Are MGT’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 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 firstname.lastname@example.org.