When ITC Limited (NSEI:ITC) announced its most recent earnings (31 December 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how ITC 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 ITC has performed.
How ITC fared against its long-term earnings performance and its industry
ITC’s trailing twelve-month earnings (from 31 December 2019) of ₹150b has jumped 22% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 9.3%, indicating the rate at which ITC is growing has accelerated. What’s the driver of this growth? Let’s see if it is merely because of an industry uplift, or if ITC has experienced some company-specific growth.
In terms of returns from investment, ITC has invested its equity funds well leading to a 26% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 19% exceeds the IN Tobacco industry of 13%, indicating ITC has used its assets more efficiently. However, its return on capital (ROC), which also accounts for ITC’s debt level, has declined over the past 3 years from 30% to 29%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as ITC gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research ITC to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for ITC’s future growth? Take a look at our free research report of analyst consensus for ITC’s outlook.
- Financial Health: Are ITC’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 December 2019. This may not be consistent with full year annual report figures.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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