In this article, I will take a look at Havells India Limited’s (NSE:HAVELLS) most recent earnings update (31 March 2018) and compare these latest figures against its performance over the past few years, along with how the rest of HAVELLS’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.
Did HAVELLS beat its long-term earnings growth trend and its industry?HAVELLS’s trailing twelve-month earnings (from 31 March 2018) of ₹6.75b has jumped 39.85% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.81%, indicating the rate at which HAVELLS is growing has accelerated. What’s the driver of this growth? Let’s take a look at whether it is only attributable to an industry uplift, or if Havells India has experienced some company-specific growth.
Over the past few years, Havells India grew its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the IN electrical industry has been growing its average earnings by double-digit 19.19% over the past year, and 15.23% over the past five years. This growth is a median of profitable companies of 25 Electrical companies in IN including BGR Energy Systems, BGR Energy Systems and Eon Electric. This shows that whatever uplift the industry is enjoying, Havells India is able to leverage this to its advantage.In terms of returns from investment, Havells India has fallen short of achieving a 20% return on equity (ROE), recording 18.02% instead. However, its return on assets (ROA) of 9.84% exceeds the IN Electrical industry of 7.01%, indicating Havells India has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Havells India’s debt level, has increased over the past 3 years from 23.18% to 24.02%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 68.06% to 3.09% over the past 5 years.
What does this mean?
Though Havells India’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Havells India gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Havells India to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HAVELLS’s future growth? Take a look at our free research report of analyst consensus for HAVELLS’s outlook.
- Financial Health: Are HAVELLS’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 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 email@example.com.