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Does John Menzies plc’s (LON:MNZS) 48.24% Earnings Growth Make It An Outperformer?

Assessing John Menzies plc’s (LSE:MNZS) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how John Menzies is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its retail distributors industry peers. View our latest analysis for John Menzies

How Did MNZS’s Recent Performance Stack Up Against Its Past?

I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method enables me to examine many different companies in a uniform manner using the most relevant data points. For John Menzies, its most recent earnings (trailing twelve month) is UK£12.60M, which, in comparison to last year’s figure, has risen by 48.24%. Since these values may be fairly myopic, I’ve computed an annualized five-year value for MNZS’s earnings, which stands at UK£19.21M This means that, while earnings growth from last year was positive, in the long run, John Menzies’s earnings have been declining on average.

LSE:MNZS Income Statement Jun 19th 18
LSE:MNZS Income Statement Jun 19th 18

Why is this? Let’s examine what’s transpiring with margins and whether the whole industry is facing the same headwind. Revenue growth in the last couple of years, has been positive, yet earnings growth has been deteriorating. This implies that John Menzies has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the UK retail distributors industry has been growing, albeit, at a unexciting single-digit rate of 6.33% in the previous twelve months, and a substantial 10.25% over the previous five years. This means that any uplift the industry is benefiting from, John Menzies is capable of amplifying this to its advantage.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There may be variables that are affecting the entire industry hence the high industry growth rate over the same time period. You should continue to research John Menzies to get a more holistic view of the stock by looking at:

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  1. Financial Health: Is MNZS’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.

  2. Valuation: What is MNZS worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether MNZS is currently mispriced by the market.

  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 31 December 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.