ManTech International Corporation (NASDAQ: MANT) stock on an uptrend: Could fundamentals be driving momentum?

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ManTech International (NASDAQ: MANT) had a strong run in the equity market with a significant 13% share increase in the past month. We ask ourselves if and what role company financials are playing in this price change, because a company’s long-term fundamentals usually dictate market outcomes. In this article, we have decided to focus on the ROE of ManTech International.

Return on equity or ROE is an important factor for a shareholder to consider, as it tells them how effectively their capital is being reinvested. Simply put, it is used to assess a company’s profitability against its equity.

How to calculate return on equity?

Return on equity 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:

8.0% = 131 million US dollars ÷ 1.6 billion US dollars (based on the last twelve months to June 2021).

The “return” is the income the business has earned over the past year. This therefore means that for every $ 1 invested by its shareholder, the company generates a profit of $ 0.08.

What is the relationship between ROE and profit growth?

So far, we’ve learned that ROE measures how efficiently a business generates profits. Based 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. Assuming everything else remains the same, the higher the ROE and profit retention, the higher the growth rate of a business compared to businesses that don’t necessarily have these characteristics.

ManTech International Earnings Growth and ROE of 8.0%

At first glance, ManTech International’s ROE isn’t much to say. We then compared the company’s ROE to that of the industry as a whole and were disappointed to find that the ROE is 16% below the industry average. ManTech International has nonetheless recorded a decent net income growth of 15% over the past five years. Thus, the growth in the company’s profits could probably have been caused by other variables. For example, the business has a low payout ratio or is managed efficiently.

Then, comparing ManTech International’s net income growth with the industry, we found that the company’s reported growth is similar to the industry average growth rate of 14% over the same period.

NasdaqGS: MANT Past Profit Growth November 3, 2021

Profit growth is an important metric to consider when valuing a stock. What investors next need to determine is whether the expected earnings growth, or lack thereof, is already built into the share price. This then helps them determine whether the stock is set for a bright or dark future. Has the market assessed MANT’s future prospects? You can find out in our latest intrinsic value infographic research report.

Is ManTech International Efficiently Using Its Retained Earnings?

ManTech International has a healthy combination of a moderate three-year median payout ratio of 43% (or a retention rate of 57%) and a respectable amount of earnings growth as we’ve seen above, which means that the company has made efficient use of its profits.

In addition, ManTech International is committed to continuing to share its profits with its shareholders, which we can deduce from its long history of paying dividends for at least ten years. After studying the latest consensus data from analysts, we found that the company is expected to continue to pay out around 45% of its profits over the next three years. Regardless, ManTech International’s future ROE should reach 9.8% despite the little change expected in its payout ratio.

Conclusion

All in all, it seems that ManTech International has positive aspects for its business. Even despite the low rate of return, the company has shown impressive profit growth by reinvesting heavily in its operations. That said, the latest forecast from industry analysts shows that the company’s earnings growth is expected to slow. For more on the latest analyst forecasts for the business, check out this viewing analyst forecasts for the company.

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.

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