Increase in profitability and industry-beating performance can be essential considerations in a stock for some investors. In this article, I will take a look at HCL Technologies Limited’s (NSE:HCLTECH) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
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Did HCLTECH’s recent earnings growth beat the long-term trend and the industry?
HCLTECH’s trailing twelve-month earnings (from 30 September 2018) of US$1.4b has increased by 4.9% 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 8.3%, indicating the rate at which HCLTECH is growing has slowed down. Why could this be happening? Well, let’s examine what’s transpiring with margins and if the whole industry is feeling the heat.
In terms of returns from investment, HCL Technologies has invested its equity funds well leading to a 24% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 17% exceeds the IN IT industry of 7.1%, indicating HCL Technologies has used its assets more efficiently. However, its return on capital (ROC), which also accounts for HCL Technologies’s debt level, has declined over the past 3 years from 31% to 25%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 7.1% to 7.8% over the past 5 years.
What does this mean?
HCL Technologies’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. While HCL Technologies has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research HCL Technologies to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HCLTECH’s future growth? Take a look at our free research report of analyst consensus for HCLTECH’s outlook.
- Financial Health: Are HCLTECH’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 30 September 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 editorial-team@simplywallst.com.