Infosys Limited (NYSE:INFY): Has Recent Earnings Growth Beaten Long-Term Trend?
Analyzing Infosys Limited’s (NYSE:INFY) track record of past performance is a valuable exercise for investors. It enables us to reflect on whether or not the company has met expectations, which is a powerful signal for future performance. Today I will assess INFY’s recent performance announced on 30 September 2017 and compare these figures to its long-term trend and industry movements. See our latest analysis for Infosys
Were INFY’s earnings stronger than its past performances and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This technique allows me to examine various companies on a similar basis, using the most relevant data points. For Infosys, its latest trailing-twelve-month earnings is $2,209.0M, which, in comparison to last year’s figure, has increased by a relatively unexciting 4.84%. Given that these values are fairly myopic, I’ve created an annualized five-year value for Infosys’s earnings, which stands at $1,873.3M. This means generally, Infosys has been able to consistently raise its profits over the past couple of years as well.
How has it been able to do this? Let’s take a look at whether it is only attributable to an industry uplift, or if Infosys has seen some company-specific growth. The ascend in earnings seems to be driven by a strong top-line increase beating its growth rate of expenses. Though this has caused a margin contraction, it has made Infosys more profitable. Eyeballing growth from a sector-level, the US it industry has been growing, albeit, at a subdued single-digit rate of 2.96% in the past twelve months, and 9.97% over the previous few years. This shows that whatever recent headwind the industry is experiencing, Infosys is less exposed compared to its peers.
What does this mean?
Though Infosys’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I recommend you continue to research Infosys to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for INFY’s future growth? Take a look at our free research report of analyst consensus for INFY’s outlook.
2. Financial Health: Is INFY’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 30 September 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.
