ManTech International Corporation (NASDAQ:MANT) Stock on an Uptrend: Could Fundamentals Be Driving the Momentum?

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Most readers already know that shares of ManTech International (NASDAQ:MANT) are up a significant 17% in the past three months. We wonder if and what role company finances play in this price change, as a company’s long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on the ROE of ManTech International.

Return on Equity or ROE is a test of how effectively a company increases its value and manages investors’ money. In other words, it reveals the company’s success in turning shareholders’ investments into profits.

Check out our latest analysis for ManTech International

How is ROE calculated?

ROE can be calculated using the formula:

Return on equity = Net income (from continuing operations) ÷ Equity

So, based on the above formula, the ROE for ManTech International is:

8.2% = $137 million ÷ $1.7 billion (based on trailing 12 months to December 2021).

The “yield” is the profit of the last twelve months. This means that for every dollar of shareholders’ equity, the company generated $0.08 in profit.

Why is ROE important for earnings growth?

So far, we have learned that ROE measures how efficiently a company generates its profits. We now need to assess how much profit the company is reinvesting or “retaining” for future growth, which then gives us an idea of ​​the company’s growth potential. Assuming everything else remains unchanged, the higher the ROE and earnings retention, the higher a company’s growth rate relative to companies that don’t necessarily exhibit these characteristics.

ManTech International earnings growth and ROE of 8.2%

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 16%. ManTech International was still able to see a decent growth in net income of 13% over the past five years. Thus, the company’s earnings growth could likely have been caused by other variables. For example, the business has a low payout ratio or is efficiently managed.

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 17% over the same period.

NasdaqGS:MANT Prior Earnings Growth April 13, 2022

Earnings growth is an important factor in stock valuation. It is important for an investor to know whether the market has priced in the expected growth (or decline) in the company’s earnings. This then helps them determine if the stock is positioned for a bright or bleak future. If you’re wondering about ManTech International’s valuation, check out this indicator of its price-earnings ratio, relative to its sector.

Does ManTech International effectively reinvest its profits?

ManTech International has a three-year median payout ratio of 43%, implying that it retains the remaining 57% of its earnings. This suggests that its dividend is well covered and, given the decent growth the company has seen, it looks like management is reinvesting its earnings effectively.

Additionally, ManTech International is committed to continuing to share its profits with shareholders, which we infer from its long history of paying dividends for at least ten years. After reviewing the latest analyst consensus data, we found that the company is expected to continue to pay out about 45% of its earnings over the next three years. As a result, the company’s future ROE is also not expected to change much, with analysts predicting an ROE of 9.2%.

Conclusion

All in all, it seems that ManTech International has positive aspects for its business. Despite its low rate of return, the fact that the company reinvests a very large portion of its profits back into its business no doubt contributed to the strong growth in its profits. That said, the latest forecasts from industry analysts show that the company’s earnings growth is expected to slow. Are these analyst expectations based on general industry expectations or company fundamentals? Click here to access our analyst forecast page for the company.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. 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.

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