Shriram Transport Finance Company Limited (NSE:SRTRANSFIN): Did It Outperform The Industry?

Assessing Shriram Transport Finance Company Limited’s (NSE:SRTRANSFIN) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess SRTRANSFIN’s latest performance announced on 31 March 2018 and evaluate these figures to its historical trend and industry movements.

Check out our latest analysis for Shriram Transport Finance

Commentary On SRTRANSFIN’s Past Performance

SRTRANSFIN’s trailing twelve-month earnings (from 31 March 2018) of ₹15.57b has jumped 23.00% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -0.67%, indicating the rate at which SRTRANSFIN is growing has accelerated. What’s enabled this growth? Well, let’s take a look at if it is solely owing to industry tailwinds, or if Shriram Transport Finance has seen some company-specific growth.

Over the last couple of years, Shriram Transport Finance top-line expansion has overtaken earnings and the growth rate of expenses. Though this has led to a margin contraction, it has lessened Shriram Transport Finance’s earnings contraction. Inspecting growth from a sector-level, the IN consumer finance industry has been growing its average earnings by double-digit 18.08% over the prior twelve months, and 10.22% over the past half a decade. This growth is a median of profitable companies of 25 Consumer Finance companies in IN including Focus Industrial Resources, Bharat Financial Inclusion and Ujjivan Financial Services. This means that any tailwind the industry is enjoying, Shriram Transport Finance is able to leverage this to its advantage.

NSEI:SRTRANSFIN Income Statement Export July 31st 18
NSEI:SRTRANSFIN Income Statement Export July 31st 18
In terms of returns from investment, Shriram Transport Finance has not invested its equity funds well, leading to a 12.37% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 1.76% is below the IN Consumer Finance industry of 2.16%, indicating Shriram Transport Finance’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Shriram Transport Finance’s debt level, has increased over the past 3 years from 3.65% to 3.74%.

What does this mean?

Shriram Transport Finance’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 Shriram Transport Finance gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I recommend you continue to research Shriram Transport Finance to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for SRTRANSFIN’s future growth? Take a look at our free research report of analyst consensus for SRTRANSFIN’s outlook.
  2. Financial Health: Is SRTRANSFIN’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.
  3. 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 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.