Does Carborundum Universal Limited’s (NSE:CARBORUNIV) 30% Earnings Growth Make It An Outperformer?
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After looking at Carborundum Universal Limited’s (NSE:CARBORUNIV) latest earnings announcement (31 December 2018), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. 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 a crucial aspect. Below is a brief commentary on my key takeaways.
Check out our latest analysis for Carborundum Universal
How Did CARBORUNIV’s Recent Performance Stack Up Against Its Past?
CARBORUNIV’s trailing twelve-month earnings (from 31 December 2018) of ₹2.5b has jumped 30% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 21%, indicating the rate at which CARBORUNIV is growing has accelerated. What’s the driver of this growth? Let’s see if it is solely attributable to an industry uplift, or if Carborundum Universal has seen some company-specific growth.
In terms of returns from investment, Carborundum Universal has fallen short of achieving a 20% return on equity (ROE), recording 15% instead. However, its return on assets (ROA) of 12% exceeds the IN Machinery industry of 7.2%, indicating Carborundum Universal has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Carborundum Universal’s debt level, has increased over the past 3 years from 16% to 18%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 38% to 5.8% over the past 5 years.
What does this mean?
Though Carborundum Universal’s past data is helpful, it is only one aspect of my investment thesis. While Carborundum Universal has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Carborundum Universal to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for CARBORUNIV’s future growth? Take a look at our free research report of analyst consensus for CARBORUNIV’s outlook.
Financial Health: Are CARBORUNIV’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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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.
