Want To Invest In The Hi-Tech Gears Limited (NSE:HITECHGEAR)? Here's How It Performed Lately

In this commentary, I will examine The Hi-Tech Gears Limited's (NSE:HITECHGEAR) latest earnings update (31 March 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the auto components industry performed. As an investor, I find it beneficial to assess HITECHGEAR’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.

Check out our latest analysis for Hi-Tech Gears

How HITECHGEAR fared against its long-term earnings performance and its industry

HITECHGEAR's trailing twelve-month earnings (from 31 March 2018) of ₹342.43m has jumped 71.51% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -8.02%, indicating the rate at which HITECHGEAR is growing has accelerated. What's enabled this growth? Let's see if it is merely due to an industry uplift, or if Hi-Tech Gears has seen some company-specific growth.

Over the past couple of years, Hi-Tech Gears top-line expansion has outstripped earnings and the growth rate of expenses. Though this brought about a margin contraction, it has lessened Hi-Tech Gears's earnings contraction. Looking at growth from a sector-level, the IN auto components industry has been growing its average earnings by double-digit 29.50% in the previous twelve months, and 13.60% over the past five years. This growth is a median of profitable companies of 25 Auto Components companies in IN including Rasandik Engineering Industries India, Precision Camshafts and Precision Camshafts. This means that whatever uplift the industry is profiting from, Hi-Tech Gears is able to leverage this to its advantage.

In terms of returns from investment, Hi-Tech Gears has fallen short of achieving a 20% return on equity (ROE), recording 14.22% instead. Furthermore, its return on assets (ROA) of 7.87% is below the IN Auto Components industry of 8.09%, indicating Hi-Tech Gears's are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Hi-Tech Gears’s debt level, has declined over the past 3 years from 14.04% to 9.62%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 28.47% to 142.40% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Hi-Tech Gears to get a more holistic view of the stock by looking at:

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

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.