After reading Rosseti Public Joint Stock Company’s (MCX:RSTI) 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 RSTI has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. See our latest analysis for Rosseti
Commentary On RSTI’s Past Performance
RSTI’s trailing twelve-month earnings (from 31 March 2018) of RUруб109.83b has jumped 52.08% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 27.04%, indicating the rate at which RSTI is growing has accelerated. How has it been able to do this? Let’s take a look at if it is solely a result of an industry uplift, or if Rosseti has seen some company-specific growth.
Over the past couple of years, Rosseti grew its bottom line faster than revenue by efficiently controlling its costs. This brought about a margin expansion and profitability over time. Inspecting growth from a sector-level, the RU electric utilities industry has been growing its average earnings by double-digit 41.09% over the prior year, and 13.74% over the past five years. This suggests that any uplift the industry is deriving benefit from, Rosseti is able to amplify this to its advantage.
In terms of returns from investment, Rosseti has not invested its equity funds well, leading to a 10.02% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 5.13% is below the RU Electric Utilities industry of 5.74%, indicating Rosseti’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Rosseti’s debt level, has increased over the past 3 years from 4.57% to 8.59%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 37.65% to 37.28% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Rosseti has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Rosseti to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RSTI’s future growth? Take a look at our free research report of analyst consensus for RSTI’s outlook.
- Financial Health: Is RSTI’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 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.