Eye on Arcotech as a growth stock: its revenue grew 45.7% and EBITDA 36.7% annually over the last three years
14-05-2014 • About Arcotech (
$ARCOTECH) • By InTwits
Arcotech is a growth stock in Copper industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.
Growth story
Arcotech showed growth in the last financial year. The company's revenue surged on 69.3% in FY2014. The growth also happened in EBITDA of 78.9% for the same period.
If we look for the longer period the company showed fast revenue growth of 45.7% from FY2011 to FY2014 annually. EBITDA surged on 36.7% from FY2011 to FY2014 annually.
Arcotech ($ARCOTECH) financials for the last 5 years
| mln. INR | FY2010 | FY2011 | FY2012 | FY2013 | FY2014 |
|---|
| Revenue | 7,868 | 2,022 | 2,528 | 3,691 | 6,249 |
|---|
| Revenue growth, % | | -74.3% | 25.0% | 46.0% | 69.3% |
|---|
| SG&A, % | | | | | |
|---|
| EBITDA | 169 | 332 | 384 | 474 | 848 |
|---|
| EBITDA growth, % | | 96.6% | 15.6% | 23.5% | 78.9% |
|---|
| EBITDA margin, % | 2.15% | 16.4% | 15.2% | 12.9% | 13.6% |
|---|
| Net Income | 77 | 142 | 177 | 229 | 331 |
|---|
| Net Income margin, % | 0.976% | 7.01% | 7.02% | 6.21% | 5.30% |
|---|
| |
| CAPEX | 213 | 107 | 101 | 228 | 222 |
|---|
| CAPEX/Revenue, % | 2.71% | 5.27% | 4.01% | 6.18% | 3.54% |
|---|
| Debt | 452 | 668 | 772 | 1,409 | 2,142 |
|---|
| Cash | 3 | 1 | 1 | 0 | 1 |
|---|
| Net Debt/EBITDA | 2.7x | 2.0x | 2.0x | 3.0x | 2.5x |
|---|
| |
| ROIC, % | 27.9% | 30.7% | 25.8% | 21.5% | 25.7% |
|---|
| ROE, % | 18.6% | 27.2% | 26.1% | 25.2% | 27.5% |
|---|
Profitability and return on investment
EBITDA growth was partly attributed to margin expansion. EBITDA margin increased on 0.700 pp from 12.9% to 13.6% in FY2014. If we look for the longer period Arcotech's EBITDA margin dropped on 2.80 pp from 16.4% in FY2011 to 13.6% in FY2014.
Arcotech shows attractive ROIC at 25.7% for the last 12 months which assumes stable development model. During the last three years it dropped - it was 30.7% in FY2011. It's average ROIC for the last three years was 24.4%.
The company showed big decline in Net Income margin of 0.900 pp from 6.20% to 5.30% in FY2014. If we look for the longer period Arcotech showed big decline in Net Income margin of 1.70 pp from 7% in FY2011 to 5.30% in FY2014.
Arcotech operates at ROE of 27.5%. Average ROE for the last three years was 26.3%.
Capital expenditures (CAPEX)
The company's CAPEX/Revenue was 3.54% in FY2014. CAPEX/Revenue dropped on 1.73 pp from 5.27% in FY2011 to 3.54% in FY2014. It's average level of CAPEX/Revenue for the last three years was 4.58%.
Leverage (Debt)
Arcotech has medium debt level at 2.5x Net Debt/EBITDA to maintain high growth. In the longer period leverage surged on 0.52x from 2.01x in FY2011 to 2.52x in FY2014.
Valuation vs. comparable companies
The company trades at 8.7x EV/EBITDA which is 45.5% lower than 16.0x Copper industry avearge calculated based on 18 companies. The company trades at 15.9x P/E which is the same as 15.9x Copper industry avearge calculated based on 1 company.
For capital intensive compnanies it's worth taking a look at EV/(EBITDA-CAPEX) multiple. The company trades at 11.8x EV/(EBITDA-CAPEX) which is not surprisingly 245% higher than 3.4x Copper industry avearge calculated based on 1 company.
