Multi-Color Corp. :LABL-US: Earnings Analysis: Q2, 2017 By the Numbers : December 12, 2016

Multi-Color Corp. reports financial results for the quarter ended September 30, 2016.

We analyze the earnings along side the following peers of Multi-Color Corp. – InnerWorkings, Inc., R.R. Donnelley & Sons Company, Cimpress N.V., Cenveo, Inc. and Brady Corporation Class A (INWK-US, RRD-US, CMPR-US, CVO-US and BRC-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 232.14 million, Net Earnings of USD 16.34 million.
  • Gross margins widened from 21.44% to 21.52% compared to the same period last year, operating (EBITDA) margins now 18.35% from 18.42%.
  • Year-on-year change in operating cash flow of 45.02% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating (EBIT) margins contributed to decline in earnings, despite some positive contribution from one-time items.

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

2016-09-30 2016-06-30 2016-03-31 2015-12-31 2015-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 232.14 236.49 227.09 206.03 219.78
Revenue Growth (%YOY) 5.62 8.52 10.53 8.94 3.17
Earnings (mil) 16.34 15.81 8.29 9.63 16.57
Earnings Growth (%YOY) -1.37 19.25 -28.63 0.89 47.13
Net Margin (%) 7.04 6.68 3.65 4.67 7.54
EPS 0.96 0.93 0.49 0.57 0.98
Return on Equity (%) 18.36 18.35 10.04 12.3 21.33
Return on Assets (%) 6.16 5.93 3.14 3.72 6.44

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Market Share Versus Profits

Revenues History
Earnings History

LABL-US‘s change in revenue this period compared to the same period last year of 5.62% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that LABL-US is holding onto its market share. Also, for comparison purposes, revenues changed by -1.84% and earnings by 3.40% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings declined year-on-year largely because of the increases in operating costs. Its operating margins (EBITDA margins) went from 18.42% to 18.35%. This decline in earnings would have been worse except for the fact that the company showed improvement in gross margins, from 21.44% to 21.52%. For comparison, gross margins were 22.03% and EBITDA margins 17.54% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

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 improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 49.34 days from 51.39 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

LABL-US‘s change in operating cash flow of 45.02% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


The company’s earnings fell, largely because of the narrowing in operating margins, which decreased from 13.27% to 13.13%. The decline in earnings probably would have been worse, were it not for some one-time items that improved pretax margins from 10.03% to 10.31%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Multi-Color Corp. engages in the provision of label solutions supporting various industries such as home and personal care, wine and spirit, food and beverage, healthcare and specialty consumer products. It offers pressure sensitive labels, in-mold labels, heat transfer labels, glue-applied labels, shrink sleeve labels, and graphic services. The company was founded in 1916 and is headquartered in Batavia, OH.

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