As analysts forecast Asahi Songwon Colors Limited (BOM:532853) to record solid earnings growth of 40.41% in the coming year, it’s important to take a step back and consider this strong vision. Investors should consider the forces that are driving this growth, because the sustainability of returns to shareholders can be impacted on in different ways. To get a preliminary understanding, I will shine a light on the behaviour of Asahi Songwon Colors’s margins to assist in analysing the revenue and cost anatomy behind the earnings expectations for the future and the impact it has on shareholder returns relative to the wider industry.See our latest analysis for Asahi Songwon Colors
What can we tell from 532853’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. Knowing the portion of top line revenue that is turned into net income helps to assess this ability whilst spotting profit drivers, and can be found by calculating 532853’s profit margin.
Margin Calculation for 532853
Profit Margin = Net Income ÷ Revenue
∴ Profit Margin = ₹230.76m ÷ ₹2.98b = 7.74%
There has been an expansion in Asahi Songwon Colors’s margin over the past five years, with 4.93% in average net income growth surpassing 1.91% in average revenue growth, which suggests that the company has been able to convert a larger percentage of revenue into net income whilst grow their top line at the same time. 532853’s most recent margin of 7.74% appears to follow this trend, indicating that earnings growth has likely been driven through improved cost management alongside the benefits of revenue growth.
Using Asahi Songwon Colors’s margin expectations as a way to understand projections for the future
Based on future expectations, 532853’s profit margin will expand further, with annual revenue growth tipped at 16.05% and a forecasted 29.96% 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. Nonetheless, those interested in the company should remember that a expanding margin has different impacts on profit and return depending on the underlying situation, which reinforces the importance of deeper research.
For 532853, there are three relevant aspects 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 532853 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 532853 is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of 532853? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!