Most readers already know that shares of ManTech International (NASDAQ:MANT) are up 4.3% in the past three months. As most know, long-term fundamentals have a strong correlation with market price movements, so we decided to take a look at key business financial indicators today to see if they have a role to play. play in the recent price movement. Specifically, we decided to study the ROE of ManTech International in this article.
Return on equity or ROE is an important factor for a shareholder to consider as it tells them how much of their capital is being reinvested. In simple terms, it is used to assess the profitability of a company in relation to its equity.
How do you calculate return on equity?
the return on equity formula is:
Return on equity = Net income (from continuing operations) ÷ Equity
So, based on the above formula, the ROE for ManTech International is:
7.8% = $124 million ÷ $1.6 billion (based on trailing 12 months to March 2021).
“Yield” is the income the business has earned over the past year. One way to conceptualize this is that for every $1 of share capital it has, the firm has made a profit of $0.08.
What does ROE have to do with earnings growth?
So far we have learned that ROE is a measure of a company’s profitability. Depending on how much of its profits the company chooses to reinvest or “keep”, we are then able to assess a company’s future ability to generate profits. Generally speaking, all things being equal, companies with high return on equity and earnings retention have a higher growth rate than companies that do not share these attributes.
ManTech International earnings growth and ROE of 7.8%
At first glance, there isn’t much to say about ManTech International’s ROE. We then compared the company’s ROE to the entire industry and were disappointed to see that the ROE is below the industry average of 14%. However, we can see that ManTech International has seen modest net income growth of 17% over the past five years. We feel there could be other factors at play here. For example, the business has a low payout ratio or is efficiently managed.
As a next step, we compared ManTech International’s net income growth with the industry, and fortunately, we found that the growth the company saw was above the industry average growth of 13%.
Earnings growth is an important metric to consider when evaluating a stock. What investors then need to determine is whether the expected earnings growth, or lack thereof, is already priced into the stock price. This then helps them determine if the stock is positioned for a bright or bleak future. Has the market priced in MANT’s future prospects? You can find out in our latest intrinsic value infographic research report.
Does ManTech International effectively reinvest its profits?
With a three-year median payout ratio of 38% (implying the company retains 62% of its earnings), it appears that ManTech International is effectively reinvesting to see respectable earnings growth and paying a dividend that is well covered.
Also, ManTech International has been paying dividends for at least ten years or more. This shows that the company is committed to sharing profits with its shareholders. Our latest analyst data shows that the company’s future payout ratio over the next three years is expected to be around 44%. As a result, the company’s future ROE is also not expected to change much, with analysts predicting an ROE of 9.0%.
Overall, we think ManTech International certainly has some positive factors to consider. Even despite the low rate of return, the company posted impressive earnings growth thanks to massive reinvestment in its business. That said, a study of the latest analyst forecasts shows that the company should see a slowdown in future earnings growth. For more on the company’s future earnings growth forecast, check out this free analyst forecast report for the company to learn more.
This Simply Wall St article is general in nature. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.