After reading Public Joint-Stock Company Federal Hydro-Generating Company – RusHydro’s (MCX:HYDR) latest earnings update (31 March 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether HYDR has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.
Did HYDR perform worse than its track record and industry?
HYDR’s trailing twelve-month earnings (from 31 March 2018) of RUруб28.03b has declined by -35.1% 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 20.8%, indicating the rate at which HYDR is growing has slowed down. Why could this be happening? Well, let’s look at what’s occurring with margins and if the rest of the industry is experiencing the hit as well.
Over the past couple of years, revenue growth has fallen behind which suggests that Federal Hydro-Generating Company – RusHydro’s bottom line has been propelled by unsustainable cost-reductions. Looking at growth from a sector-level, the RU electric utilities industry has been relatively flat in terms of earnings growth over the prior twelve months, evening out from a solid 10.3% over the past five years. This growth is a median of profitable companies of 24 Electric Utilities companies in RU including TNS energo Kuban, Volgogradenergosbyt and Territorial Generation Company No. 14. This shows that any near-term headwind the industry is enduring, it’s hitting Federal Hydro-Generating Company – RusHydro harder than its peers.
In terms of returns from investment, Federal Hydro-Generating Company – RusHydro has fallen short of achieving a 20% return on equity (ROE), recording 3.7% instead. Furthermore, its return on assets (ROA) of 2.4% is below the RU Electric Utilities industry of 5.7%, indicating Federal Hydro-Generating Company – RusHydro’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Federal Hydro-Generating Company – RusHydro’s debt level, has increased over the past 3 years from 5.1% to 6.5%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 29.7% to 21.9% over the past 5 years.
What does this mean?
Federal Hydro-Generating Company – RusHydro’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors impacting its business. I suggest you continue to research Federal Hydro-Generating Company – RusHydro to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for HYDR’s future growth? Take a look at our free research report of analyst consensus for HYDR’s outlook.
- Financial Health: Are HYDR’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 firstname.lastname@example.org.