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After reading Automotive Axles Limited's (NSE:AUTOAXLES) most recent earnings announcement (31 March 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
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Were AUTOAXLES's earnings stronger than its past performances and the industry?
AUTOAXLES's trailing twelve-month earnings (from 31 March 2019) of ₹1.2b has jumped 45% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 42%, indicating the rate at which AUTOAXLES is growing has accelerated. How has it been able to do this? Let's see whether it is merely because of an industry uplift, or if Automotive Axles has seen some company-specific growth.
In terms of returns from investment, Automotive Axles has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the IN Auto Components industry of 7.9%, indicating Automotive Axles has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Automotive Axles’s debt level, has increased over the past 3 years from 17% to 30%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 20% to 12% over the past 5 years.
What does this mean?
Though Automotive Axles's past data is helpful, it is only one aspect of my investment thesis. While Automotive Axles 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 Automotive Axles to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for AUTOAXLES’s future growth? Take a look at our free research report of analyst consensus for AUTOAXLES’s outlook.
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Financial Health: Are AUTOAXLES’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.
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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.