For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Banco Products (India) Limited (NSE:BANCOINDIA) useful as an attempt to give more color around how Banco Products (India) is currently performing.
Did BANCOINDIA’s recent earnings growth beat the long-term trend and the industry?
BANCOINDIA’s trailing twelve-month earnings (from 30 September 2018) of ₹1.2b has jumped 44% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.5%, indicating the rate at which BANCOINDIA is growing has accelerated. How has it been able to do this? Let’s see if it is solely owing to industry tailwinds, or if Banco Products (India) has experienced some company-specific growth.
In terms of returns from investment, Banco Products (India) has fallen short of achieving a 20% return on equity (ROE), recording 14% instead. However, its return on assets (ROA) of 9.0% exceeds the IN Auto Components industry of 7.6%, indicating Banco Products (India) has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Banco Products (India)’s debt level, has increased over the past 3 years from 11% to 20%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 39% to 6.8% over the past 5 years.
What does this mean?
Banco Products (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 recommend you continue to research Banco Products (India) to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for BANCOINDIA’s future growth? Take a look at our free research report of analyst consensus for BANCOINDIA’s outlook.
- Financial Health: Are BANCOINDIA’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 September 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.