ManTech International (NASDAQ: MANT) stock rose 7.8% in the past month. As most know, fundamentals generally guide long-term market price movements, so we decided to look at the company’s key financial metrics today to see if they have a role to play in the recent one. price movement. Specifically, we have decided to study the ROE of ManTech International in this article.
Return on equity or ROE is a test of how effectively a company increases its value and manages investor money. In other words, it is a profitability ratio that measures the rate of return on capital contributed by the shareholders of the company.
See our latest analysis for ManTech International
How to calculate return on equity?
ROE can be calculated using the formula:
Return on equity = Net income (from continuing operations) ÷ Equity
Thus, based on the above formula, the ROE of ManTech International is:
8.4% = US $ 139 million ÷ US $ 1.7 billion (based on the last twelve months to September 2021).
“Return” refers to a company’s profits over the past year. One way to conceptualize this is that for every $ 1 of shareholder capital it has, the company has made $ 0.08 in profit.
Why is ROE important for profit growth?
So far, we’ve learned that ROE is a measure of a company’s profitability. We now need to assess how much profit the company is reinvesting or “holding back” for future growth, which then gives us an idea of the growth potential of the company. Assuming everything else is equal, companies that have both a higher return on equity and higher profit retention are generally those that have a higher growth rate than companies that do not have the same characteristics.
ManTech International earnings growth and ROE of 8.4%
When you first watch it, ManTech International’s ROE doesn’t look so appealing. We then compared the company’s ROE to that of the industry as a whole and were disappointed to find that the ROE is 15% below the industry average. However, the moderate 15% net income growth observed by ManTech International over the past five years is certainly positive. We think there might be other factors at play here. Such as – high profit retention or effective management in place.
As a next step, we compared ManTech International’s net income growth with the industry and found that the company has a similar growth figure compared to the industry average growth rate of 15% over the past year. same period.
The basis for attaching value to a business is, to a large extent, related to the growth of its profits. The investor should try to establish whether the expected growth or decline in earnings, as the case may be, is taken into account. In doing so, he’ll have an idea if the action is heading for clear blue waters or swampy waters ahead. Is MANT valued enough? This intrinsic business value infographic has everything you need to know.
Is ManTech International using its profits effectively?
ManTech International has a three-year median payout ratio of 43%, which means it keeps the remaining 57% of its profits. This suggests that its dividend is well hedged and, given the decent growth of the company, it appears that management is reinvesting its earnings in an efficient manner.
In addition, ManTech International has paid dividends over a period of at least ten years, which means the company is very serious about sharing its profits with its shareholders. After studying the latest consensus data from analysts, we found that the company is expected to continue to pay out around 51% of its profits over the next three years. As a result, ManTech International’s ROE is not expected to change much either, which we have deduced from analysts’ estimate of 7.6% for future ROE.
Overall, we think ManTech International certainly has some positive factors to consider. Despite its low rate of return, the fact that the company reinvested a very large portion of its profits back into its business has undoubtedly contributed to the strong profit growth. That said, looking at current analysts’ estimates, we were concerned that while the company has increased profits in the past, analysts expect its profits to decline in the future. To learn more about the latest analyst forecast for the business, check out this visualization of the analyst forecast for the business.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in any of the stocks mentioned.