Yahoo Finance Does McMillan Shakespeare Limited's (ASX:MMS) 27% Earnings Growth Reflect The Long-Term Trend?
In this article, I will take a look at McMillan Shakespeare Limited's (ASX:MMS) most recent earnings update (30 June 2019) and compare these latest figures against its performance over the past few years, along with how the rest of MMS's industry performed. As a long-term investor, I find it useful to analyze the company's trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
View our latest analysis for McMillan Shakespeare
Were MMS's earnings stronger than its past performances and the industry?
MMS's trailing twelve-month earnings (from 30 June 2019) of AU$64m has jumped 27% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -4.0%, indicating the rate at which MMS is growing has accelerated. What's the driver of this growth? Let's take a look at if it is solely because of an industry uplift, or if McMillan Shakespeare has seen some company-specific growth.
In terms of returns from investment, McMillan Shakespeare has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. Furthermore, its return on assets (ROA) of 8.7% is below the AU Professional Services industry of 8.9%, indicating McMillan Shakespeare's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for McMillan Shakespeare’s debt level, has declined over the past 3 years from 19% to 18%.
What does this mean?
Though McMillan Shakespeare's past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn't always indicative of a continued optimistic outlook. There may be factors that are affecting the entire industry hence the high industry growth rate over the same period of time. You should continue to research McMillan Shakespeare to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MMS’s future growth? Take a look at our free research report of analyst consensus for MMS’s outlook.
Financial Health: Are MMS’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 30 June 2019. This may not be consistent with full year annual report figures.
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