Investors with a long-term horizong may find it valuable to assess Methven Limited’s (NZSE:MVN) earnings trend over time and against its industry benchmark as opposed to simply looking at a sincle earnings announcement at one point in time. Below is my commentary, albiet very simple and high-level, on how Methven is currently performing. View our latest analysis for Methven
Despite a decline, did MVN underperform the long-term trend and the industry?
I like to use the ‘latest twelve-month’ data, 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 method allows me to assess different stocks in a uniform manner using the most relevant data points. For Methven, its latest earnings (trailing twelve month) is NZ$5.8M, which compared to last year’s figure, has dropped by -15.64%. Since these figures may be somewhat nearsighted, I’ve calculated an annualized five-year value for Methven’s net income, which stands at NZ$5.4M. This shows that even though earnings declined from the previous year, over the past couple of years, Methven’s earnings have been increasing on average.
What’s enabled this growth? Let’s see if it is solely owing to industry tailwinds, or if Methven has experienced some company-specific growth. In the last few years, Methven grew bottom-line, while its top-line declined, by effectively managing its costs. This brought about to a margin expansion and profitability over time. Inspecting growth from a sector-level, the NZ building industry has been growing its average earnings by double-digit 11.76% over the past twelve months, and 12.07% over the previous five years. This means any tailwind the industry is enjoying, Methven has not been able to reap as much as its industry peers.
What does this mean?
Though Methven’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 Methven to get a better picture of the stock by looking at:
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1. Future Outlook: What are well-informed industry analysts predicting for MVN’s future growth? Take a look at our free research report of analyst consensus for MVN’s outlook.
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2. Financial Health: Is MVN’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.
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3. 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 2017. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.