When VA Tech Wabag Limited (NSE:WABAG) released its most recent earnings update (30 June 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how VA Tech Wabag 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 WABAG has performed.
Did WABAG beat its long-term earnings growth trend and its industry?
WABAG’s trailing twelve-month earnings (from 30 June 2018) of ₹1.4b has jumped 29% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 4.9%, indicating the rate at which WABAG is growing has accelerated. What’s the driver of this growth? Well, let’s take a look at whether it is only due to industry tailwinds, or if VA Tech Wabag has seen some company-specific growth.
In terms of returns from investment, VA Tech Wabag has fallen short of achieving a 20% return on equity (ROE), recording 13% instead. Furthermore, its return on assets (ROA) of 4.3% is below the IN Water Utilities industry of 4.6%, indicating VA Tech Wabag’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for VA Tech Wabag’s debt level, has increased over the past 3 years from 13% to 16%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as VA Tech Wabag gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research VA Tech Wabag to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for WABAG’s future growth? Take a look at our free research report of analyst consensus for WABAG’s outlook.
- Financial Health: Are WABAG’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.
- 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 30 June 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 email@example.com.