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Assessing Persistent Systems Limited’s (NSE:PERSISTENT) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess PERSISTENT’s latest performance announced on 30 June 2018 and evaluate these figures to its historical trend and industry movements.
See our latest analysis for Persistent Systems
Were PERSISTENT’s earnings stronger than its past performances and the industry?
PERSISTENT’s trailing twelve-month earnings (from 30 June 2018) of ₹3.35b has jumped 10.58% 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 11.74%, indicating the rate at which PERSISTENT is growing has slowed down. To understand what’s happening, let’s look at what’s going on with margins and whether the rest of the industry is feeling the heat.
Revenue growth over the last couple of years, has been positive, however, earnings growth has failed to keep up meaning Persistent Systems has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the IN it industry has been growing its average earnings by double-digit 14.24% over the previous year, and 11.03% over the previous five years. This growth is a median of profitable companies of 25 IT companies in IN including Bharatiya Global Infomedia, Bharatiya Global Infomedia and CyberTech Systems and Software. This suggests that any uplift the industry is profiting from, Persistent Systems has not been able to gain as much as its industry peers.
In terms of returns from investment, Persistent Systems has fallen short of achieving a 20% return on equity (ROE), recording 15.14% instead. However, its return on assets (ROA) of 10.74% exceeds the IN IT industry of 8.75%, indicating Persistent Systems has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Persistent Systems’s debt level, has declined over the past 3 years from 24.65% to 19.61%.
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 Persistent Systems to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for PERSISTENT’s future growth? Take a look at our free research report of analyst consensus for PERSISTENT’s outlook.
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Financial Health: Are PERSISTENT’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.