is past performance good indicator?

Usually past performance is a reliable indicator of future performance but if the situation (macro) changes then its usefulness is significantly diminished. I've compared two contractors, both with excellent management to demonstrate.

DTL sells computer hardware, cloud and IT services to a range of corp and govt clients. It doesn't have a series of shops. Instead it sources the hardware elsewhere and installs into clients workplaces along with assistance/training to use the new tools. It has been very successful and revenues grew for many years. Then in 2013 demand dropped, revenue fell, and profits fell and SP dived. DTL reassessed and using the strong relationships with clients firm expanded the range of services to its IT clients. Over past couple of yrs this part of their business has grown substantially and profits have jumped. The big benefit of services (which are still only 20% of revenue) is that the margin is 4x higher than product sales. So any change is service revenue has substantial effect on bottom line.

MND too has long successful history with a range of firms here in Oz. Company works closely with clients and designs, constructs and maintains infrastructure in the energy and mining sector. The commodity boom saw revenue and profits rocket. Contracts were cost+margin and ROE reached 80% in 2011. When boom began to fade two yrs ago MND focused on getting long maintenance contracts and ventured into civil work such a water supply etc. This has been successful and gains in these areas have been made. But maintenance and civil contracts have smaller margins than construction and the recent falls in earnings are significantly higher than drop in revenue.

So what can MND do? Until energy and commodity prices increase massively the available work in construction will stay very weak. Demand for civil work will remain and MND likely to win its share. MND recently announced a JV with large manufacturer of wind turbines. But this venture won't produce significant earnings in the short term. Hence, i see options for all firms in consulting and construction engineering as very limited. Work on the huge LNG plants in Gladstone and NW is largely completed and there is nothing to replace it. Plus the maintenance contracts on offer are small compared with those signed by MND during the boom. On the other hand services in the IT sector are growing in size and are a natural extension of the relationships DTL have. Hence i see very different outcomes to these 2 contractors over next few yrs.

On previous MND threads i found only one estimate re FY16 earnings/divs: 'SP $15.00 per share based on the 10% short position and earnings per share expectation of $1.00 and 75 cents of dividend.' I've done some guesstimates of my own which differ considerably.

We'll know MND's yr end results in 14 days time. More importantly the 'outlook statement' will indicate what FY17 holds.

disclosure: long in DTL and (starting last week) short in MND. VERY hard to find stk to borrow.

DSD estimate on 16.12.15 re IHFY16 results
Rev: 723m
Op income: 54m
Net inc: 38.6m
eps: 40.6c
div interim: 35c ffr

Actual 1HFY16 result
Rev: 737m
EBITDA: 62.7m
NPAT: 37.6m
EPS: 40.4c
div interim: 28c
Net debt: +182.7m
EBITDA margin: 8.5%

Summary of estimate
Revenue and EPS estimate slightly above actual result. Div estimate way too high.
disclosure: I bought MND at $5.35 and sold a week later (dec 2015) for $6.04av. SP now at $11.75!

DSD estimate of FY16 result
Rev: 1399m
EBITDA: 119.2m
NPAT: 71.6m
EPS: 76.7c
FY div: 52c
Net debt: +174m
EBITDA margin: 8.5%
NPAT margin:5.1%
If estimate is ball park then at SP $11.75 PE 15x and EV/EBITDA 7.77.

and here are my guesstimates re FY17
Rev: 1240m
EBITDA: 97.5m
NPAT: 60m
EPS: 64c
FY div: 44.5c
Net debt: +164m (very hard to estimate)
EBITDA margin: 7.85%
NPAT margin: 4.84%

Be great to see any other estimates re FY16 yr end. Anyone want to have a stab?