When Genpact Limited (NYSE:G) released its most recent earnings update (31 December 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Genpact performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see G has performed.
How Did G's Recent Performance Stack Up Against Its Past?
G's trailing twelve-month earnings (from 31 December 2018) of US$282m has increased by 7.2% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.7%, indicating the rate at which G is growing has accelerated. How has it been able to do this? Let's take a look at if it is solely owing to industry tailwinds, or if Genpact has seen some company-specific growth.
In terms of returns from investment, Genpact has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 9.0% exceeds the US IT industry of 5.8%, indicating Genpact has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Genpact’s debt level, has declined over the past 3 years from 15% to 14%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 50% to 93% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Genpact gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Genpact to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for G’s future growth? Take a look at our free research report of analyst consensus for G’s outlook.
- Financial Health: Are G’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 December 2018. This may not be consistent with full year annual report figures.
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