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After reading ITC Limited’s (NSE:ITC) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
View our latest analysis for ITC
How Did ITC’s Recent Performance Stack Up Against Its Past?
ITC’s trailing twelve-month earnings (from 31 March 2018) of ₹113b has increased by 9.5% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.7%, indicating the rate at which ITC is growing has accelerated. What’s the driver of this growth? Let’s take a look at if it is merely a result of an industry uplift, or if ITC has seen some company-specific growth.
In terms of returns from investment, ITC has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 16% exceeds the IN Tobacco industry of 7.9%, indicating ITC has used its assets more efficiently. However, its return on capital (ROC), which also accounts for ITC’s debt level, has declined over the past 3 years from 39% to 28%.
What does this mean?
ITC’s track record can be a valuable insight into its earnings performance, but it certainly 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 suggest you continue to research ITC 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 ITC’s future growth? Take a look at our free research report of analyst consensus for ITC’s outlook.
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Financial Health: Are ITC’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 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.