For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Capital First Limited’s (NSE:CAPF) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
Could CAPF beat the long-term trend and outperform its industry?CAPF’s trailing twelve-month earnings (from 31 March 2018) of ₹3.28b has jumped 36.78% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 26.10%, indicating the rate at which CAPF is growing has accelerated. What’s enabled this growth? Well, let’s take a look at whether it is solely due to industry tailwinds, or if Capital First has seen some company-specific growth.
The rise in earnings seems to be bolstered by a robust top-line increase outstripping its growth rate of expenses. Though this brought about a margin contraction, it has made Capital First more profitable. Viewing growth from a sector-level, the IN consumer finance industry has been growing its average earnings by double-digit 18.08% in the previous twelve months, and a more subdued 9.97% 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 whatever tailwind the industry is gaining from, Capital First is capable of leveraging this to its advantage.In terms of returns from investment, Capital First has not invested its equity funds well, leading to a 12.54% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 1.26% is below the IN Consumer Finance industry of 2.14%, indicating Capital First’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Capital First’s debt level, has increased over the past 3 years from 2.68% to 2.77%.
What does this mean?
Though Capital First’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Capital First to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CAPF’s future growth? Take a look at our free research report of analyst consensus for CAPF’s outlook.
- Financial Health: Is CAPF’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.
To help readers see pass 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 firstname.lastname@example.org.