When Magellan Financial Group’s (ASX:MFG) announced its latest earnings (30 June 2017), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Magellan Financial Group’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not MFG actually performed well. Below is a quick commentary on how I see MFG has performed. See our latest analysis for Magellan Financial Group

Was MFG weak performance lately part of a long-term decline?

I prefer to use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This enables me to examine various companies on a similar basis, using the latest information. For Magellan Financial Group, its most recent bottom-line (trailing twelve month) is A$196.2M, which, against the prior year’s figure, has fallen by -1.07%. Given that these figures may be somewhat myopic, I’ve estimated an annualized five-year figure for MFG’s net income, which stands at A$101.3M. This means that, on average, Magellan Financial Group has been able to improve its earnings over the past few years.

What’s the driver of this growth? Well, let’s take a look at if it is solely because of industry tailwinds, or if Magellan Financial Group has seen some company-specific growth. Over the last couple of years, Magellan Financial Group grew its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Scanning growth from a sector-level, the Australian capital markets industry has been growing, albeit, at a subdued single-digit rate of 3.16% in the prior year, and 8.12% over the past five years. This suggests that any recent headwind the industry is experiencing, it’s hitting Magellan Financial Group harder than its peers.

What does this mean?

Though Magellan Financial Group’s past data is helpful, it is only one aspect of my investment thesis. Companies are profitable, but have capricious earnings, can have many factors affecting its business. You should continue to research Magellan Financial Group to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for MFG’s future growth? Take a look at our free research report of analyst consensus for MFG’s outlook.

2. Financial Health: Is MFG’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.