Yahoo Finance Morneau Shepell Inc (TSE:MSI): Has Recent Earnings Growth Beaten Long-Term Trend?
After looking at Morneau Shepell Inc’s (TSE:MSI) latest earnings announcement (31 March 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 a crucial aspect. Below is a brief commentary on my key takeaways. Check out our latest analysis for Morneau Shepell
Could MSI beat the long-term trend and outperform its industry?
MSI’s trailing twelve-month earnings (from 31 March 2018) of CA$40.53m has jumped 48.84% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 8.50%, indicating the rate at which MSI is growing has accelerated. What’s the driver of this growth? Let’s take a look at if it is merely a result of industry tailwinds, or if Morneau Shepell has experienced some company-specific growth.
The hike in earnings seems to be bolstered by a strong top-line increase outstripping its growth rate of costs. Though this resulted in a margin contraction, it has made Morneau Shepell more profitable. Viewing growth from a sector-level, the Canadian professional services industry has been growing its average earnings by double-digit 48.84% over the past twelve months, and 16.07% over the past five years.
In terms of returns from investment, Morneau Shepell has not invested its equity funds well, leading to a 11.18% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 6.41% exceeds the CA Professional Services industry of 5.41%, indicating Morneau Shepell has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Morneau Shepell’s debt level, has increased over the past 3 years from 5.98% to 8.84%.
What does this mean?
Though Morneau Shepell’s past data is helpful, it is only one aspect of my investment thesis. While Morneau Shepell has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Morneau Shepell to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for MSI’s future growth? Take a look at our free research report of analyst consensus for MSI’s outlook.
Financial Health: Is MSI’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 March 2018. 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.
