After looking at MGP Ingredients, Inc.’s (NASDAQ:MGPI) latest earnings update (31 December 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Was MGPI weak performance lately part of a long-term decline?
MGPI’s trailing twelve-month earnings (from 31 December 2018) of US$37m has declined by -10% 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 29%, indicating the rate at which MGPI is growing has slowed down. Why is this? Well, let’s look at what’s transpiring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, MGP Ingredients has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 14% exceeds the US Beverage industry of 7.5%, indicating MGP Ingredients has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for MGP Ingredients’s debt level, has declined over the past 3 years from 21% to 21%.
What does this mean?
Though MGP Ingredients’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research MGP Ingredients to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for MGPI’s future growth? Take a look at our free research report of analyst consensus for MGPI’s outlook.
- Financial Health: Are MGPI’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 2018. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.