Understanding how HCL Technologies Limited (NSE:HCLTECH) is performing as a company requires looking at more than just a years’ earnings. Today I will run you through a basic sense check to gain perspective on how HCL Technologies is doing by comparing its latest earnings with its long-term trend as well as the performance of its it industry peers.
View our latest analysis for HCL Technologies
Did HCLTECH beat its long-term earnings growth trend and its industry?
HCLTECH’s trailing twelve-month earnings (from 30 June 2018) of US$1.4b has increased by 6.6% 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 9.3%, indicating the rate at which HCLTECH is growing has slowed down. What could be happening here? Well, let’s look at what’s transpiring with margins and if the entire industry is experiencing the hit as well.
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 18% exceeds the IN IT industry of 7.9%, 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 35% to 29%.
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. You should 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 June 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.