After looking at Berger Paints India Limited’s (NSEI:BERGEPAINT) latest earnings announcement (30 June 2019), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.
Commentary On BERGEPAINT’s Past Performance
BERGEPAINT’s trailing twelve-month earnings (from 30 June 2019) of ₹5.4b has jumped 12% 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 14%, indicating the rate at which BERGEPAINT is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Berger Paints India has invested its equity funds well leading to a 22% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the IN Chemicals industry of 8.7%, indicating Berger Paints India has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Berger Paints India’s debt level, has declined over the past 3 years from 33% to 29%.
What does this mean?
Berger Paints India’s track record can be a valuable insight into its earnings performance, but it certainly 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? I suggest you continue to research Berger Paints India to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BERGEPAINT’s future growth? Take a look at our free research report of analyst consensus for BERGEPAINT’s outlook.
- Financial Health: Are BERGEPAINT’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.
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