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Assessing Reliance Infrastructure Limited’s (NSEI:RELINFRA) past track record of performance is a useful exercise for investors. It allows us to understand whether the company has met or exceed expectations, which is a great indicator for future performance. Below, I assess RELINFRA’s latest performance announced on 31 December 2017 and evaluate these figures to its historical trend and industry movements. See our latest analysis for Reliance Infrastructure

How Well Did RELINFRA Perform?

I look at data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to assess different stocks on a more comparable basis, using the latest information. For Reliance Infrastructure, its most recent bottom-line (trailing twelve month) is ₹13.00B, which, in comparison to last year’s level, has sunken by a substantial -42.02%. Given that these figures are fairly short-term, I’ve estimated an annualized five-year figure for Reliance Infrastructure’s earnings, which stands at ₹17.93B This doesn’t look much better, since earnings seem to have steadily been deteriorating over time.

Why could this be happening? Well, let’s look at what’s occurring with margins and if the whole industry is facing the same headwind. Revenue growth over the past few years, has been positive, nevertheless earnings growth has been declining. This means Reliance Infrastructure has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the IN electric utilities industry has been growing its average earnings by double-digit 15.43% over the prior year, and a more subdued 9.32% over the past half a decade. This shows that whatever uplift the industry is enjoying, Reliance Infrastructure has not been able to gain as much as its average peer.

What does this mean?

Reliance Infrastructure’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that endure an extended period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and expansion. I suggest you continue to research Reliance Infrastructure to get a more holistic view of the stock by looking at:

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

• 2. Financial Health: Is RELINFRA’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 December 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.