Examining Repco Home Finance Limited’s (NSE:REPCOHOME) past track record of performance is a useful exercise for investors. It allows us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess REPCOHOME’s latest performance announced on 31 March 2018 and weight these figures against its longer term trend and industry movements. See our latest analysis for Repco Home Finance
Did REPCOHOME beat its long-term earnings growth trend and its industry?REPCOHOME’s trailing twelve-month earnings (from 31 March 2018) of ₹2.15b has jumped 14.75% 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 21.30%, indicating the rate at which REPCOHOME is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and whether the rest of the industry is facing the same headwind.
Revenue growth over the past few years, has been positive, however, earnings growth has fallen behind meaning Repco Home Finance has been increasing its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the IN consumer finance industry has been growing its average earnings by double-digit 16.68% over the prior year, and a more subdued 9.38% over the last five years. 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 uplift the industry is deriving benefit from, Repco Home Finance has not been able to leverage it as much as its industry peers.In terms of returns from investment, Repco Home Finance has not invested its equity funds well, leading to a 15.98% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 2.16% exceeds the IN Consumer Finance industry of 2.14%, indicating Repco Home Finance has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Repco Home Finance’s debt level, has increased over the past 3 years from 3.92% to 4.83%.
What does this mean?
Repco Home Finance’s track record can be a valuable insight into its earnings performance, but it certainly 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 Repco Home Finance to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for REPCOHOME’s future growth? Take a look at our free research report of analyst consensus for REPCOHOME’s outlook.
- Financial Health: Is REPCOHOME’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.