When Hindustan Unilever Limited (BOM:500696) announced its most recent earnings (31 March 2018), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Hindustan Unilever 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 500696 has performed. View out our latest analysis for Hindustan Unilever
How Did 500696’s Recent Performance Stack Up Against Its Past?500696’s trailing twelve-month earnings (from 31 March 2018) of ₹52.12b has jumped 16.13% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 7.63%, indicating the rate at which 500696 is growing has accelerated. What’s the driver of this growth? Let’s take a look at if it is merely attributable to an industry uplift, or if Hindustan Unilever has seen some company-specific growth.
Over the last few years, Hindustan Unilever expanded its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Scanning growth from a sector-level, the IN household products industry has been enduring some headwinds in the past twelve months, leading to an average earnings drop of -10.60%. This is a major change, given that the industry has constantly been delivering a a robust growth of 23.30% in the last five years. This means that whatever recent headwind the industry is experiencing, Hindustan Unilever is relatively better-cushioned than its peers.In terms of returns from investment, Hindustan Unilever has invested its equity funds well leading to a 71.57% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 27.74% exceeds the US tech industry of 11.83%, indicating Hindustan Unilever has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Hindustan Unilever’s debt level, has declined over the past 3 years from 102.12% to 80.39%.
What does this mean?
While past data is useful, it 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? You should continue to research Hindustan Unilever to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 500696’s future growth? Take a look at our free research report of analyst consensus for 500696’s outlook.
- Financial Health: Is 500696’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.