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Measuring InterGlobe Aviation Limited’s (NSE:INDIGO) track record of past performance is an insightful exercise for investors. It enables us to reflect on whether the company has met or exceed expectations, which is a powerful signal for future performance. Below, I will assess INDIGO’s recent performance announced on 31 March 2018 and compare these figures to its historical trend and industry movements.
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How Did INDIGO’s Recent Performance Stack Up Against Its Past?
INDIGO’s trailing twelve-month earnings (from 31 March 2018) of ₹22.42b has jumped 35.1% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 23.0%, indicating the rate at which INDIGO is growing has accelerated. How has it been able to do this? Let’s take a look at if it is only due to industry tailwinds, or if InterGlobe Aviation has seen some company-specific growth.
In the past couple of years, InterGlobe Aviation grew its bottom line faster than revenue by successfully controlling its costs. This has caused a margin expansion and profitability over time. Viewing growth from a sector-level, the IN airlines industry has been growing its average earnings by double-digit 18.6% in the past twelve months, and 18.9% over the previous five years. This growth is a median of profitable companies of stocks internationally, operating in the industry. I’ve decided to use a global peer group as there’s not enough companies in that are considered as appropriate peers, and I wanted to get a broader perspective on the regional growth. Some peers include , and . This shows that whatever tailwind the industry is gaining from, InterGlobe Aviation is able to leverage this to its advantage.
In terms of returns from investment, InterGlobe Aviation has invested its equity funds well leading to a 31.7% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 10.0% exceeds the IN Airlines industry of 6.2%, indicating InterGlobe Aviation has used its assets more efficiently. However, its return on capital (ROC), which also accounts for InterGlobe Aviation’s debt level, has declined over the past 3 years from 22.2% to 18.2%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While InterGlobe Aviation 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 InterGlobe Aviation to get a better picture of the stock by looking at: