Morgan Sindall Group plc's (LON:MGNS) Stock Is Going Strong: Is the Market Following Fundamentals?
Return on Equity or ROE is a test of how effectively a company is growing its value and managing investors' money. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.
This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.
How To Calculate Return On Equity?
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Morgan Sindall Group is:
20% = UK£132m ÷ UK£647m (Based on the trailing twelve months to December 2024).
The 'return' refers to a company's earnings over the last year. One way to conceptualize this is that for each £1 of shareholders' capital it has, the company made £0.20 in profit.
See our latest analysis for Morgan Sindall Group
What Is The Relationship Between ROE And Earnings Growth?
So far, we've learned that ROE is a measure of a company's profitability. Based on how much of its profits the company chooses to reinvest or "retain", we are then able to evaluate a company's future ability to generate profits. Generally speaking, other things being equal, firms with a high return on equity and profit retention, have a higher growth rate than firms that don't share these attributes.
A Side By Side comparison of Morgan Sindall Group's Earnings Growth And 20% ROE
To start with, Morgan Sindall Group's ROE looks acceptable. Further, the company's ROE compares quite favorably to the industry average of 14%. This probably laid the ground for Morgan Sindall Group's moderate 16% net income growth seen over the past five years.
We then compared Morgan Sindall Group's net income growth with the industry and found that the company's growth figure is lower than the average industry growth rate of 31% in the same 5-year period, which is a bit concerning.
Earnings growth is a huge factor in stock valuation. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. This then helps them determine if the stock is placed for a bright or bleak future. One good indicator of expected earnings growth is the P/E ratio which determines the price the market is willing to pay for a stock based on its earnings prospects. So, you may want to check if Morgan Sindall Group is trading on a high P/E or a low P/E, relative to its industry.
Is Morgan Sindall Group Efficiently Re-investing Its Profits?
Morgan Sindall Group has a healthy combination of a moderate three-year median payout ratio of 46% (or a retention ratio of 54%) and a respectable amount of growth in earnings as we saw above, meaning that the company has been making efficient use of its profits.
Besides, Morgan Sindall Group 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 future payout ratio of the company over the next three years is expected to be approximately 48%. Accordingly, forecasts suggest that Morgan Sindall Group's future ROE will be 17% which is again, similar to the current ROE.
Summary
Overall, we are quite pleased with Morgan Sindall Group's performance. Specifically, we like that the company is reinvesting a huge chunk of its profits at a high rate of return. This of course has caused the company to see a good amount of growth in its earnings. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
11 minutes ago
- Yahoo
Liverpool arrange meeting with European giant for MEGA transfer
Negotiators begin talks for mega deal The deal in question is for Luis Diaz to move to Bayern Munich, with the German giants interested. An approach has already been rejected for him, with Liverpool reiterating the 'not-for-sale' stance, but rumours are suggesting that there is a fee that could convince the Reds to sell - around €100m. But reports from Germany are suggesting that a meeting has been scheduled to begin serious talks. Christian Falk took to X on Saturday and said: "There will be a meeting between Bayern and Liverpool for negotiations for a transfer of Luis Diaz soon. The poker Poker is influenced by the transfer of Hugo Ekitike. Liverpool FC is preparing a mega offer of €100m for Ekitike. Should Liverpool get their desired player, they can invest the transfer fee of Diaz."
American Military News
43 minutes ago
- American Military News
EU Budget Proposal Doubles Ukraine Aid And Boosts Military Spending
This article was originally published by Radio Free Europe/Radio Liberty and is reprinted with permission. The European Commission has put forward its vision for the next long-term (2028-2034) European Union budget — a record-high 2-trillion-euro ($2.3 trillion) framework, with a doubling of funds for both Ukraine and EU foreign policy in general, and a fivefold increase in defense-related investment. It is worth remembering that the July 16 proposal is just the opening shot in a battle that will consume Brussels for the next two years. All 27 EU member states, which provide the vast majority of the cash through national contributions linked to their gross national income (GNI), must approve the proposal. But this is not likely to happen until what is expected to be marathon, last-minute negotiations in the latter half of 2027. So don't count on the budget remaining at 2 trillion euros by then — or on Ukraine, foreign policy, and enlargement policy getting as much financial support as the European Commission presented on July 16. Most of the net contributors — in other words, those who pay more into the common budget than they receive back — are mainly richer northern member states such as Germany, the Netherlands, and Sweden, and they aren't keen to increase the budget at all. The commission proposal is already a 600-billion-euro ($700 billion) jump compared to the 2021-2027 budget. And with several countries grappling with low growth, ballooning deficits, and budget cuts, the idea of the EU expanding its coffers right now could be useful ammunition for Euroskeptic parties railing against Brussels across the continent. To appease member states on this, the European Commission is proposing two things. First, new 'own resources' so that the budget isn't so dependent on member state contributions. Some of the new ideas include a tobacco tax and levies on large corporations. Few think this will succeed or have much impact. So instead, the second thing that the commission proposes is to send most of the cash back to member states in the shape of support for farmers, fishermen, and poorer regions of the bloc. This is already the biggest section of the budget at the moment — worth a total of 865 billion euro ($1 trillion) of the 2-trillion-euro proposal. It probably won't shrink. Interestingly, there is now a proposal to allocate 131 billion euro ($152 billion) for defense, which would be a fivefold increase compared to the current level. Several member states, notably Denmark and France, have indicated that the EU must become more of a military player, especially as the United States might dedicate fewer military resources to the continent in the coming years. If the proposal is not watered down, this would signal real intent on the issue. So, what about the foreign policy aspects of the commission's plan? It's all grouped under the heading 'A Stronger Europe in the World' and totals €200 billion ($233 billion). This is a doubling of the previous budget and contains everything from humanitarian aid, various foreign missions the bloc has — such as a monitoring mission in Armenia — to pre-accession funds for EU candidate countries in the Western Balkans and the bloc's eastern neighborhood. The money proposed for pre-accession is around 40 billion euros ($46 billion), an increase from before, but there is still no breakdown of how much cash each country will get. What is interesting, however, is that there is a revision clause in the proposal which means that the budget will be reworked if a country joins the club during the 2028-2034 period. After all, members tend to get more money than candidate countries. And given that nations like Albania, Montenegro, and possibly even Moldova could join within this time frame, they stand to gain even more. It is worth remembering here that Ukraine has been given a separate heading altogether. While Kyiv, of course, can benefit from the 200 billion euro of accession and humanitarian cash, European Commission President Ursula von der Leyen has promised a dedicated 100-billion-euro ($116 billion) pot for the reconstruction of the war-torn country. Between 2024 and 2027, this so-called 'Ukraine facility' amounts to €50 billion ($58 billion) in loans and grants, financed through common EU borrowing, which all member states guarantee to repay. The question is whether a country like Hungary, which has been skeptical about all things Ukraine in recent years, will agree to this — especially as von der Leyen announced that rule of law conditionality applies to all the funds in the new budget. This conditionality existed to a certain degree in the previous budget and allowed Brussels to freeze billions heading to Budapest. Watering down conditionality in order to get more money for Ukraine already seems like one of the many compromises that will now have to be struck for this budget to eventually go through.
Yahoo
an hour ago
- Yahoo
Analyst updates S&P 500 forecast in mid-year outlook
Analyst updates S&P 500 forecast in mid-year outlook originally appeared on TheStreet. There weren't many beating the bullish drum on the stock market in early April. The S&P 500 and tech-laden Nasdaq Composite were mired in a brutal downturn following harsher-than-hoped tariff announcements and growing economic concerns on jobs and inflation. The S&P 500 retreated 19% from its mid-February highs before finding its footing on April 9. That near-bear market had everyone a bit antsy, particularly given President Donald Trump's mounting trade war. Nevertheless, stocks' decline was fast and steep enough to cause most sentiment measures to signal oversold, suggesting that those willing to step into the fray could be rewarded for buying the dip. And boy, have they been rewarded. 💵💰💰💵 The S&P 500 has marched 25% higher, and the Nasdaq has surged over 30%. President Trump's pause on most reciprocal tariffs fueled the gains on April 9. Hope that tariffs would settle at more manageable levels and significant new stimulus associated with trillions of dollars in tax cuts from the One Big Beautiful Bill Act kept the rally humming along to new all-time highs. The big question on most minds now is whether this record-setting run can continue. Those in the bearish camp point toward weaker GDP, cracks in the jobs market, and inflation risks. Bullish investors think most of those risks were priced in during the spring sell-off, and the bar has been set low enough that anything less than disaster would be good enough to push forward revenue, earnings, and economic outlooks higher, rather than lower. The debate has prompted many popular Wall Street analysts, including Carson Group's Chief Strategist Ryan Detrick, to update their outlook. The stock market climbs a very high wall of worry Stocks are forward-looking and are considered a leading, rather than lagging, indicator. The ability of stock prices to predict what may happen to the economy can be messy, with short-term fits and starts. However, stocks' ability to aggregate market participants' collective wisdom is generally considered a valuable tool for economists and predictive nature of markets is one reason behind the old Wall Street adage, "stocks climb a wall of worry." Often, stocks bottom when everyone thinks the worst has yet to happen, and they top when everyone sees roses and daisies. Over the past three months, the stock market has climbed a big wall of concern. U.S. employers have announced over 696,000 layoffs through May, up 80% year over year, according to Challenger, Gray & Christmas. The unemployment rate has inched up to 4.1% in June from 3.4% in 2023. And inflation, while much lower than in 2022, when the Federal Reserve declared war on it by significantly raising interest rates, is still above the 2% level targeted by many, including the Fed. The backdrop still suggests that stagflation or, worse, recession is a possibility. But so far, stocks indicate the economy will sidestep most damage. While we don't know when the Fed may support the economy with interest rate cuts, most are modeling lower rates over the coming year, helping fuel economic activity. Also, the recently passed One Big Beautiful Bill Act contains significant tax cuts, including new Social Security income tax breaks and a higher State and Local Tax deduction, which provide additional money to support spending and GDP. If so, analysts who cut revenue and growth outlooks this spring will shift gears, increasing forecasts and potentially fueling additional upside. Those upward revisions would go a long way toward appeasing those concerned about the S&P 500's valuation, given that the recent rally has inflated its price-to-earnings (P/E) ratio. The S&P 500 topped out in February when its forward price-to-earnings ratio eclipsed 22. It bottomed out when the P/E ratio reached about 19. The recent rally has again pushed the S&P 500's P/E over 22, which historically doesn't correspond with favorable one-year returns. Analysts' mid-year 2025 stock market outlook is largely bullish Ryan Detrick has been correctly banging the bullish drum for a while, and his team's midyear outlook also tells a bullish tale. Detrick's optimism is partially rooted in history. He often shares data highlighting how the stock market has historically behaved after catalysts, and this time is no exception. Fortunately, for bulls, history is on the side of more gains. The strategist points out that since the early 1970s, there have been five instances when the S&P 500 rose by 19% in 27 trading days like this year. Each time, the market was higher one year later, returning a median of 32.6%. Since 1950, the S&P 500 has been up one year later 74% of the time, returning a median of 10.4%.We've already made a big chunk of returns, but Detrick's team writes, "This is still a young bull market." The average bull market lasts 67 months, and this one has only lasted a little over 30 months so far. "Like a cruise ship that is very hard to turn once it gets moving, bull markets tend to carry their momentum forward, another reason this one could last much longer than many think," wrote the analysts. As for valuation, they believe there's a bull case that a "low tariffs, big tax bill" environment will provide a catalyst for earnings, helping keep the P/E ratio in check. "It's hard to imagine that the tariffs will go back to where they were, but perhaps we're left with about 15% additional new tariffs on average— not at all trivial, but far from worst case," wrote the analysts. "Companies should be able to navigate the additional tariffs and maintain profit margins, especially larger companies with less fragile supply chains." Carson Group thinks the S&P 500 could reach 6,550, a 10% to 12% gain for 2025. Add in dividends, and the index's total return could be 12% to 15%. Currently, the S&P 500 is up about 7% in 2025. "Stocks came soaring back in one of the largest reversals ever, suggesting the lows for 2025 are likely behind us and better times could be coming for investors,' said Detrick. 'While 2025 has already been a wild ride — and we should still prepare for more ups and downs — we see reasons to expect this bull market to continue.'Analyst updates S&P 500 forecast in mid-year outlook first appeared on TheStreet on Jul 20, 2025 This story was originally reported by TheStreet on Jul 20, 2025, where it first appeared. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
