Has NTPC Limited (NSE:NTPC) Improved Earnings In Recent Times?
Today I will examine NTPC Limited’s (NSE:NTPC) latest earnings update (31 March 2018) and compare these figures against its performance over the past couple of years, in addition to how the rest of NTPC’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time.
View our latest analysis for NTPC
Did NTPC’s recent earnings growth beat the long-term trend and the industry?
NTPC’s trailing twelve-month earnings (from 31 March 2018) of ₹105.4b has declined by -1.6% compared to the previous year.
Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of -3.0%, indicating the rate at which NTPC is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and if the entire industry is facing the same headwind.
In terms of returns from investment, NTPC has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. Furthermore, its return on assets (ROA) of 5.4% is below the IN Renewable Energy industry of 5.9%, indicating NTPC’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for NTPC’s debt level, has increased over the past 3 years from 5.5% to 5.7%.
What does this mean?
Though NTPC’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that experience a prolonged period of reduction in earnings are undergoing some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a indicator of a structural shift, which makes NTPC and its peers a riskier investment. I recommend you continue to research NTPC to get a better picture of the stock by looking at:
Future Outlook: What are well-informed industry analysts predicting for NTPC’s future growth? Take a look at our free research report of analyst consensus for NTPC’s outlook.
Financial Health: Are NTPC’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 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.
