When Genpact Limited (NYSE:G) released its most recent earnings update (30 June 2019), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Genpact's average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not G actually performed well. Below is a quick commentary on how I see G has performed.
Did G's recent earnings growth beat the long-term trend and the industry?
G's trailing twelve-month earnings (from 30 June 2019) of US$287m has increased by 6.4% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 7.5%, indicating the rate at which G is growing has slowed down. Why could this be happening? Well, let's examine what's going on with margins and if the whole industry is facing the same headwind.
In terms of returns from investment, Genpact has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 8.2% exceeds the US IT industry of 6.0%, indicating Genpact has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Genpact’s debt level, has declined over the past 3 years from 14% to 13%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 69% to 81% over the past 5 years.
What does this mean?
While past data is useful, it 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? You should continue to research Genpact to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for G’s future growth? Take a look at our free research report of analyst consensus for G’s outlook.
- Financial Health: Are G’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 30 June 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.