When Andhra Bank (NSEI:ANDHRABANK) released its most recent earnings update (31 March 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Andhra Bank has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see ANDHRABANK has performed. See our latest analysis for Andhra Bank
Was ANDHRABANK weak performance lately part of a long-term decline?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method enables me to assess different stocks on a similar basis, using the latest information. For Andhra Bank, its most recent trailing-twelve-month earnings is ₹2,071.0M, which, relative to the previous year’s figure, has sunken by a non-trivial -62.89%. Given that these values are relatively short-term, I have created an annualized five-year value for Andhra Bank’s net income, which stands at ₹8,192.6M. This doesn’t seem to paint a better picture, since earnings seem to have consistently been declining over time.What could be happening here? Well, let’s look at what’s transpiring with margins and whether the whole industry is facing the same headwind. Revenue growth over the past few years, has been positive, nevertheless earnings growth has been declining. This suggest that Andhra Bank has been increasing expenses, which is harming margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the IN banks industry has been growing, albeit, at a subdued single-digit rate of 7.74% in the past twelve months, and a flatter 0.01% over the previous few years. This means whatever tailwind the industry is profiting from, Andhra Bank has not been able to reap as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that face a prolonged period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I recommend you continue to research Andhra Bank to get a better picture of the stock by looking at:
1. Financial Health: Is ANDHRABANK’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.
2. 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 31 March 2017. This may not be consistent with full year annual report figures.