Does ELGI Equipments Limited’s (NSE:ELGIEQUIP) Past Performance Indicate A Stronger Future?
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In this article, I will take a look at ELGI Equipments Limited’s (NSE:ELGIEQUIP) most recent earnings update (31 December 2018) and compare these latest figures against its performance over the past few years, along with how the rest of ELGIEQUIP’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
Check out our latest analysis for ELGI Equipments
How ELGIEQUIP fared against its long-term earnings performance and its industry
ELGIEQUIP’s trailing twelve-month earnings (from 31 December 2018) of ₹945m has increased by 6.2% 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 18%, indicating the rate at which ELGIEQUIP is growing has slowed down. What could be happening here? Well, let’s look at what’s transpiring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, ELGI Equipments has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 7.0% is below the IN Machinery industry of 7.1%, indicating ELGI Equipments’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for ELGI Equipments’s debt level, has increased over the past 3 years from 12% to 16%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 79% to 40% over the past 5 years.
What does this mean?
ELGI Equipments’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While ELGI Equipments 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 ELGI Equipments to get a more holistic view of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for ELGIEQUIP’s future growth? Take a look at our free research report of analyst consensus for ELGIEQUIP’s outlook.
Financial Health: Are ELGIEQUIP’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.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
