As analysts forecast Majesco Limited (BOM:539289) to produce twice as much earnings in the coming year, it’s necessary to take a moment and reflect on this confident outlook. Those invested in the stock should contemplate the factors that are causing this growth, as the return realised by shareholders may look different in the future if underlying assumptions are not realised. To get a preliminary understanding, I will try to evaluate Majesco’s margin behaviour so investors can evaluate the revenue and cost drivers behind future earnings projections and understand how they may impact on returns compared to the industry.Check out our latest analysis for Majesco
A closer look at 539289’s profit margin
In general, the value that accrues to equity holders is partly reliant on the ability of a company to convert sales revenue in to earnings. 539289’s profit margin will help us understand the extent of this ability, as well as identify the forces behind earnings expectations.
Margin Calculation for 539289
Profit Margin = Net Income ÷ Revenue
∴ Profit Margin = ₹62.90m ÷ ₹8.06b = 0.78%
There has been an expansion in Majesco’s margin over the past five years, with average net income growth of 50.19% surpassing 9.23% in average revenue growth, which means that the previous increase in revenue has coincided with a larger portion falling to the bottom line. 539289’s most recent margin of 0.78% appears to follow this trend, which suggests that the increase in net income has likely occurred from a combination of enhanced cost efficiency as well as top line growth.
What can we tell from future expectations?
Based on future expectations, 539289’s profit margin will continue to expand, with annual revenue growth tipped at 13.87% and a forecasted 71.99% in annual net income growth. This suggests future earnings growth is driven further by enhanced cost efficiency alongside revenue increases, which is enlarging the incremental amount of net income that is retained from the forecasted revenue growth. However, those interested in the company should remember that margin expansion can mean different things for different companies, thus more detailed research is essential.
For 539289, I’ve compiled three essential factors you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is 539289 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether 539289 is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of 539289? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!