ELGI Equipments Limited’s (NSE:ELGIEQUIP) Earnings Grew 8.2%, Did It Beat Long-Term Trend?

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When ELGI Equipments Limited (NSE:ELGIEQUIP) announced its most recent earnings (31 March 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how ELGI Equipments 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 ELGIEQUIP has performed.

View our latest analysis for ELGI Equipments

Were ELGIEQUIP’s earnings stronger than its past performances and the industry?

ELGIEQUIP’s trailing twelve-month earnings (from 31 March 2019) of ₹1.0b has increased by 8.2% 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 19%, 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 whether the whole industry is feeling the heat.

NSEI:ELGIEQUIP Income Statement, June 27th 2019
NSEI:ELGIEQUIP Income Statement, June 27th 2019

In terms of returns from investment, ELGI Equipments has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. However, its return on assets (ROA) of 8.1% exceeds the IN Machinery industry of 7.7%, indicating ELGI Equipments has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for ELGI Equipments’s debt level, has increased over the past 3 years from 13% to 16%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 73% to 25% over the past 5 years.

What does this mean?

Though ELGI Equipments’s past data is helpful, it is only one aspect of my investment thesis. 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 better picture of the stock by looking at:

  1. 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.
  2. 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.
  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 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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.