Multi-Color Corp. :LABL-US: Earnings Analysis: 2016 By the Numbers : July 22, 2016

Multi-Color Corp. reports financial results for the year ended March 31, 2016.

Highlights

  • Gross margins narrowed from 21.37% to 20.86% compared to the same period last year, operating (EBITDA) margins now 16.97% from 18.18%.
  • Change in operating cash flow of -7.08% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2012 2013 2014 2015 2016
Relevant Numbers (Annual)
Revenues 510.25 659.82 706.43 810.77 870.83
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 19.7 30.3 28.22 45.72 47.74
Earnings Growth (YOY) 7 53.81 -6.85 61.98 4.43
Net Margin 3.86 4.59 4 5.64 5.48
EPS 1.32 1.86 1.7 2.71 2.82
Return on Equity 8.86 11.48 9.86 15.57 15.1
Return on Assets 3.23 3.67 3.13 4.83 4.76

Access our Ratings and Scores for Multi-Color Corp.

Earnings Growth Analysis

The company’s earnings rose year-on-year. But this growth has not come as a result of improvement in gross margins or any cost control activities in its operations. Gross margins went from 20.86% to 21.37% for the same period last year, while operating margins (EBITDA margins) went from 16.97% to 18.18% over the same time frame.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

LABL-US‘s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 44.58 days, compared to last year’s level of 35.33 days.

Cash Versus Earnings – Sustainable Performance?

LABL-US‘s year-on-year change in operating cash flow of -7.08% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.

Margins

The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 13.08% to 11.86% and (2) one-time items that contributed to a decrease in pretax margins from 8.74% to 7.67%

EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Multi-Color Corp.

Company Profile

Multi-Color Corp. is engaged in the business of global label solutions supporting various brands such as home and personal care, wine and spirit, food and beverages, healthcare and specialty consumer products. Its products include pressure sensitive labels, in-molds, glue-applied, heat transfer, and shrink sleeve labels. The company also provides services such as conversion of customer digital files and artwork into proofs, production of print layouts and printing plates, and product mock ups and samples for market research. The company was founded in 1916 and is headquartered in Batavia, OH.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of LABL-US.

Leave a Comment