Manhattan Associates, Inc. (NASDAQ:MANH) Stock Has Shown Weakness Lately But Financials Look Strong: Should Prospective Shareholders Make The Leap?

editorial-team@simplywallst.com (Simply Wall St)

Wed, Apr 2, 2025, 6:35 AM 3 min read

Manhattan Associates (NASDAQ:MANH) has had a rough three months with its share price down 35%. But if you pay close attention, you might gather that its strong financials could mean that the stock could potentially see an increase in value in the long-term, given how markets usually reward companies with good financial health. Particularly, we will be paying attention to Manhattan Associates’ ROE today.

Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. In short, ROE shows the profit each dollar generates with respect to its shareholder investments.

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The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Manhattan Associates is:

73% = US$218m ÷ US$299m (Based on the trailing twelve months to December 2024).

The ‘return’ is the amount earned after tax over the last twelve months. That means that for every $1 worth of shareholders’ equity, the company generated $0.73 in profit.

View our latest analysis for Manhattan Associates

We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. Depending on how much of these profits the company reinvests or “retains”, and how effectively it does so, we are then able to assess a company’s earnings growth potential. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.

Firstly, we acknowledge that Manhattan Associates has a significantly high ROE. Secondly, even when compared to the industry average of 14% the company’s ROE is quite impressive. Under the circumstances, Manhattan Associates’ considerable five year net income growth of 21% was to be expected.

As a next step, we compared Manhattan Associates’ net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 20% in the same period.

Earnings growth is an important metric to consider when valuing a stock. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. Doing so will help them establish if the stock’s future looks promising or ominous. What is MANH worth today? The intrinsic value infographic in our free research report helps visualize whether MANH is currently mispriced by the market.