Today I will examine Reliance Power Limited’s (NSE:RPOWER) latest earnings update (30 June 2018) and compare these figures against its performance over the past couple of years, in addition to how the rest of RPOWER’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.

View our latest analysis for Reliance Power

How RPOWER fared against its long-term earnings performance and its industry

RPOWER’s trailing twelve-month earnings (from 30 June 2018) of ₹10.4b has increased by 4.7% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 1.4%, indicating the rate at which RPOWER is growing has accelerated. What’s the driver of this growth? Let’s see whether it is solely attributable to industry tailwinds, or if Reliance Power has seen some company-specific growth.

In terms of returns from investment, Reliance Power has fallen short of achieving a 20% return on equity (ROE), recording 4.6% instead. However, its return on assets (ROA) of 6.1% exceeds the IN Renewable Energy industry of 5.9%, indicating Reliance Power has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Reliance Power’s debt level, has declined over the past 3 years from 2.7% to 2.3%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. You should continue to research Reliance Power to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for RPOWER’s future growth? Take a look at our free research report of analyst consensus for RPOWER’s outlook.

2. Financial Health: Are RPOWER’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.

3. 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.