After reading MFA Financial Inc’s (NYSE:MFA) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether MFA Financial’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for MFA Financial
How MFA fared against its long-term earnings performance and its industryMFA’s trailing twelve-month earnings (from 31 March 2018) of US$311.00m has increased by 5.07% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 0.089%, indicating the rate at which MFA is growing has accelerated. How has it been able to do this? Let’s see whether it is only owing to an industry uplift, or if MFA Financial has experienced some company-specific growth.
The ascend in earnings seems to be supported by a robust top-line increase beating its growth rate of costs. Though this brought about a margin contraction, it has made MFA Financial more profitable. Inspecting growth from a sector-level, the US mortgage reits industry has been relatively flat in terms of earnings growth over the previous twelve months, levelling off from a robust 11.41% over the past five. This means any recent headwind the industry is facing, MFA Financial is relatively better-cushioned than its peers.In terms of returns from investment, MFA Financial has not invested its equity funds well, leading to a 10.13% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 2.93% exceeds the US Mortgage REITs industry of 2.04%, indicating MFA Financial has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for MFA Financial’s debt level, has declined over the past 3 years from 9.43% to 8.89%.
What does this mean?
Though MFA Financial’s past data is helpful, it is only one aspect of my investment thesis. While MFA Financial has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research MFA Financial to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MFA’s future growth? Take a look at our free research report of analyst consensus for MFA’s outlook.
- Financial Health: Is MFA’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.