With 10% Earnings Growth, Did RKEC Projects Limited (NSE:RKEC) Outperform The Industry?
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After looking at RKEC Projects Limited's (NSE:RKEC) latest earnings update (31 March 2019), I found it helpful to revisit the company's performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.
Check out our latest analysis for RKEC Projects
Did RKEC beat its long-term earnings growth trend and its industry?
RKEC's trailing twelve-month earnings (from 31 March 2019) of ₹224m has jumped 10% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 36%, indicating the rate at which RKEC is growing has slowed down. To understand what's happening, let’s take a look at what’s going on with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, RKEC Projects has invested its equity funds well leading to a 24% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the IN Construction industry of 6.4%, indicating RKEC Projects has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for RKEC Projects’s debt level, has increased over the past 3 years from 34% to 38%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 98% to 51% over the past 5 years.
What does this mean?
RKEC Projects's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as RKEC Projects gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research RKEC Projects to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for RKEC’s future growth? Take a look at our free research report of analyst consensus for RKEC’s outlook.
Financial Health: Are RKEC’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
