For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine Public Joint Stock Company “Cherkizovo Group”‘s (MCX:GCHE) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers.
How GCHE fared against its long-term earnings performance and its industry
GCHE’s trailing twelve-month earnings (from 31 March 2018) of RUруб6.82b has jumped 58.83% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 1.97%, indicating the rate at which GCHE is growing has accelerated. What’s enabled this growth? Well, let’s take a look at whether it is solely owing to industry tailwinds, or if Cherkizovo Group has experienced some company-specific growth.
The climb in earnings seems to be bolstered by a robust top-line increase outstripping its growth rate of expenses. Though this resulted in a margin contraction, it has made Cherkizovo Group more profitable. Eyeballing growth from a sector-level, the RU food industry has been growing, albeit, at a subdued single-digit rate of 6.64% over the previous year, and 8.45% over the past half a decade. Since the Food sector in RU is relatively small, I’ve included similar companies in the wider region in order to get a better idea of the growth, which is a median of profitable companies of companies such as PJSC Russian Aquaculture, Ros Agro and Krasnyj Octyabr. This means any uplift the industry is enjoying, Cherkizovo Group is capable of amplifying this to its advantage.
In terms of returns from investment, Cherkizovo Group has fallen short of achieving a 20% return on equity (ROE), recording 12.68% instead. However, its return on assets (ROA) of 8.34% exceeds the RU Food industry of 6.14%, indicating Cherkizovo Group has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Cherkizovo Group’s debt level, has declined over the past 3 years from 30.36% to 5.04%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 91.78% to 99.80% over the past 5 years.
What does this mean?
Cherkizovo Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Cherkizovo Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for GCHE’s future growth? Take a look at our free research report of analyst consensus for GCHE’s outlook.
- Financial Health: Are GCHE’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 email@example.com.