Assessing Public Joint Stock Company Gazprom Gazoraspredelenie Rostov-na-Donu’s (MCX:RTGZ) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess RTGZ’s recent performance announced on 30 June 2018 and evaluate these figures to its long-term trend and industry movements.
Was RTGZ’s recent earnings decline indicative of a tough track record?
RTGZ’s trailing twelve-month earnings (from 30 June 2018) of RUруб698.3m has declined by -10.7% 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 -2.3%, indicating the rate at which RTGZ is growing has slowed down. Why could this be happening? Let’s examine what’s going on with margins and if the whole industry is experiencing the hit as well.
Revenue growth in the past couple of years, has been positive, however earnings growth has been deteriorating. This implies that Gazprom Gazoraspredelenie Rostov-na-Donu has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice.
Eyeballing growth from a sector-level, the RU gas utilities industry has been enduring some headwinds over the previous year, leading to an average earnings drop of -3.5%. This is a momentous change, given that the industry has constantly been delivering a a notable growth of 14.4% in the past half a decade. Since the Gas Utilities 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 Gaz-service, and . This suggests that whatever near-term headwind the industry is facing, it’s hitting Gazprom Gazoraspredelenie Rostov-na-Donu harder than its peers.
In terms of returns from investment, Gazprom Gazoraspredelenie Rostov-na-Donu has fallen short of achieving a 20% return on equity (ROE), recording 9.5% instead. Furthermore, its return on assets (ROA) of 4.2% is below the RU Gas Utilities industry of 5.2%, indicating Gazprom Gazoraspredelenie Rostov-na-Donu’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Gazprom Gazoraspredelenie Rostov-na-Donu’s debt level, has declined over the past 3 years from 12.1% to 10.4%.
What does this mean?
Though Gazprom Gazoraspredelenie Rostov-na-Donu’s past data is helpful, it is only one aspect of my investment thesis. Generally companies that face an extended period of decline in earnings are undergoing some sort of reinvestment phase Though if the entire industry is struggling to grow over time, it may be a signal of a structural shift, which makes Gazprom Gazoraspredelenie Rostov-na-Donu and its peers a higher risk investment. You should continue to research Gazprom Gazoraspredelenie Rostov-na-Donu to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for RTGZ’s future growth? Take a look at our free research report of analyst consensus for RTGZ’s outlook.
- Financial Health: Are RTGZ’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 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.