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For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Gujarat Gas Limited’s (NSE:GUJGAS) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
Check out our latest analysis for Gujarat Gas
Did GUJGAS’s recent earnings growth beat the long-term trend and the industry?
GUJGAS’s trailing twelve-month earnings (from 31 March 2018) of ₹2.92b has jumped 32.6% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 26.1%, indicating the rate at which GUJGAS is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is solely owing to industry tailwinds, or if Gujarat Gas has experienced some company-specific growth.
Over the last few years, Gujarat Gas grew bottom-line, while its top-line fell, by efficiently managing its costs. This has caused to a margin expansion and profitability over time. Eyeballing growth from a sector-level, the IN gas utilities industry has been growing its average earnings by double-digit 32.6% over the prior twelve months, and a more subdued 8.4% over the past five. This growth is a median of profitable companies of 4 Gas Utilities companies in IN including Mahanagar Gas, Indraprastha Gas and GAIL (India).
In terms of returns from investment, Gujarat Gas has fallen short of achieving a 20% return on equity (ROE), recording 15.7% instead. Furthermore, its return on assets (ROA) of 7.3% is below the IN Gas Utilities industry of 10.0%, indicating Gujarat Gas’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Gujarat Gas’s debt level, has declined over the past 3 years from 14.6% to 9.0%.
What does this mean?
Though Gujarat Gas’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Gujarat Gas gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Gujarat Gas 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 GUJGAS’s future growth? Take a look at our free research report of analyst consensus for GUJGAS’s outlook.
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Financial Health: Are GUJGAS’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.