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When Tata Elxsi Limited (NSE:TATAELXSI) announced its most recent earnings (31 March 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Tata Elxsi performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see TATAELXSI has performed.

View our latest analysis for Tata Elxsi

Could TATAELXSI beat the long-term trend and outperform its industry?

TATAELXSI's trailing twelve-month earnings (from 31 March 2019) of ₹2.9b has jumped 21% 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 26%, indicating the rate at which TATAELXSI is growing has slowed down. To understand what's happening, let's look at what's transpiring with margins and whether the whole industry is experiencing the hit as well.

In terms of returns from investment, Tata Elxsi has invested its equity funds well leading to a 31% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 23% exceeds the IN Software industry of 7.5%, indicating Tata Elxsi has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Tata Elxsi’s debt level, has declined over the past 3 years from 56% to 41%.

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? I recommend you continue to research Tata Elxsi to get a better picture of the stock by looking at:

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

2. Financial Health: Are TATAELXSI’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 31 March 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.