Margins matter. The more Vodafone Group
Here's the current margin snapshot for Vodafone Group and some of its sector and industry peers and direct competitors.
TTM Gross Margin
TTM Operating Margin
TTM Net Margin
Source: Capital IQ, a division of Standard & Poor's. TTM = trailing 12 months.
Unfortunately, that table doesn't tell us much about where Vodafone Group has been, or where it's going. A company with rising gross and operating margins often fuels its growth by increasing demand for its products. If it sells more units while keeping costs in check, its profitability increases. Conversely, a company with gross margins that inch downward over time is often losing out to competition, and possibly engaging in a race to the bottom on prices. If it can't make up for this problem by cutting costs -- and most companies can't -- then both the business and its shares face a decidedly bleak outlook.
Of course, over the short term, the kind of economic shocks we recently experienced can drastically affect a company's profitability. That's why I like to look at five fiscal years' worth of margins, along with the results for the trailing 12 months (TTM), the last fiscal year, and last fiscal quarter (LFQ). You can't always reach a hard conclusion about your company's health, but you can better understand what to expect, and what to watch.
Here's the margin picture for Vodafone Group over the past few years.
Source: Capital IQ, a division of Standard & Poor's. Dollar amounts in millions. FY= fiscal year. TTM = trailing 12 months.
Because of seasonality in some businesses, the numbers for the last period on the right -- the TTM figures -- aren't always comparable to the FY results preceding them. To compare quarterly margins to their prior-year levels, consult this chart.
Source: Capital IQ, a division of Standard & Poor's. Dollar amounts in millions. FQ = fiscal quarter.
Here's how the stats break down:
- Over the past five years, gross margin peaked at 39.8% and averaged 36.3%. Operating margin peaked at 21.9% and averaged 18.1%. Net margin peaked at 19.4% and averaged 9.2%.
- TTM gross margin is 32.8%, 350 basis points worse than the five-year average. TTM operating margin is 14.6%, 350 basis points worse than the five-year average. TTM net margin is 17.4%, 820 basis points better than the five-year average.
Vodafone presents a mixed picture here. Recent TTM operating margins are below historical averages, but net margins are quite a bit better. But looking at the quarterly results, net margins have fallen to near zero in the past two quarters. Clearly, Vodafone Group has some work to do.
If you take the time to read past the headlines and crack a filing now and then, you're probably ahead of 95% of the market's individual investors. To stay ahead, learn more about how I use analysis like this to help me uncover the best returns in the stock market. Have an opinion on the margins at Vodafone Group? Let us know in the comments section below.
Seth Jayson had no position in any company mentioned here at the time of publication. You can view his stock holdings. He is co-advisor of Motley Fool Hidden Gems, which provides new small-cap ideas every month, backed by a real-money portfolio. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.