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Is MasterCraft Boat Holdings, Inc.'s (NASDAQ:MCFT) Latest Stock Performance A Reflection Of Its Financial Health?
MasterCraft Boat Holdings (NASDAQ:MCFT) has had a great run on the share market with its stock up by a significant 19% over the last three months. Since the market usually pay for a company’s long-term fundamentals, we decided to study the company’s key performance indicators to see if they could be influencing the market. In this article, we decided to focus on MasterCraft Boat Holdings' ROE.
ROE or return on equity is a useful tool to assess how effectively a company can generate returns on the investment it received from its shareholders. In simpler terms, it measures the profitability of a company in relation to shareholder's equity.
See our latest analysis for MasterCraft Boat Holdings
How Do You Calculate Return On Equity?
ROE can be calculated by using the formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for MasterCraft Boat Holdings is:
46% = US$73m ÷ US$160m (Based on the trailing twelve months to January 2023).
The 'return' is the income the business earned over the last year. One way to conceptualize this is that for each $1 of shareholders' capital it has, the company made $0.46 in profit.
What Has ROE Got To Do With Earnings Growth?
So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.
MasterCraft Boat Holdings' Earnings Growth And 46% ROE
First thing first, we like that MasterCraft Boat Holdings has an impressive ROE. Second, a comparison with the average ROE reported by the industry of 28% also doesn't go unnoticed by us. This likely paved the way for the modest 19% net income growth seen by MasterCraft Boat Holdings over the past five years. growth
We then compared MasterCraft Boat Holdings' net income growth with the industry and found that the company's growth figure is lower than the average industry growth rate of 27% in the same period, which is a bit concerning.
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. It’s important for an investor to know whether the market has priced in the company's expected earnings growth (or decline). This then helps them determine if the stock is placed for a bright or bleak future. Is MasterCraft Boat Holdings fairly valued compared to other companies? These 3 valuation measures might help you decide.
Is MasterCraft Boat Holdings Efficiently Re-investing Its Profits?
MasterCraft Boat Holdings doesn't pay any dividend currently which essentially means that it has been reinvesting all of its profits into the business. This definitely contributes to the decent earnings growth number that we discussed above.
Conclusion
On the whole, we feel that MasterCraft Boat Holdings' performance has been quite good. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see a good amount of growth in its earnings. With that said, the latest industry analyst forecasts reveal that the company's earnings growth is expected to slow down. To know more about the company's future earnings growth forecasts take a look at this free report on analyst forecasts for the company to find out more.
What are the risks and opportunities for MasterCraft Boat Holdings?
MasterCraft Boat Holdings, Inc., through its subsidiaries, designs, manufactures, and markets recreational powerboats.
Rewards
Price-To-Earnings ratio (7.4x) is below the US market (14.9x)
Earnings are forecast to grow 3.62% per year
Earnings grew by 13.4% over the past year
Risks
No risks detected for MCFT from our risks checks.
Further research on
MasterCraft Boat Holdings
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This article by Simply Wall St 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. Simply Wall St has no position in any stocks mentioned.
About NasdaqGM:MCFT
MasterCraft Boat Holdings
MasterCraft Boat Holdings, Inc., through its subsidiaries, designs, manufactures, and markets recreational powerboats.
Flawless balance sheet and good value.
