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Does GAIL (India) Limited's (NSE:GAIL) 37% Earnings Growth Reflect The Long-Term Trend?

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When GAIL (India) Limited (NSE:GAIL) announced its most recent earnings (31 March 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how GAIL (India) 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 GAIL has performed.

Check out our latest analysis for GAIL (India)

Did GAIL beat its long-term earnings growth trend and its industry?

GAIL's trailing twelve-month earnings (from 31 March 2019) of ₹65b has jumped 37% compared to the previous year.

Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 11%, indicating the rate at which GAIL is growing has accelerated. How has it been able to do this? Let's see whether it is only because of industry tailwinds, or if GAIL (India) has experienced some company-specific growth.

NSEI:GAIL Income Statement, July 11th 2019

In terms of returns from investment, GAIL (India) has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. Furthermore, its return on assets (ROA) of 9.8% is below the IN Gas Utilities industry of 13%, indicating GAIL (India)'s are utilized less efficiently. However, its return on capital (ROC), which also accounts for GAIL (India)’s debt level, has increased over the past 3 years from 6.4% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 54% to 4.5% over the past 5 years.

What does this mean?

While past data is useful, it doesn’t tell the whole story. While GAIL (India) 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 GAIL (India) to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for GAIL’s future growth? Take a look at our free research report of analyst consensus for GAIL’s outlook.
  2. Financial Health: Are GAIL’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 March 2019. This may not be consistent with full year annual report figures.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.