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 Andhra Bank (NSEI:ANDHRABANK) useful as an attempt to give more color around how Andhra Bank is currently performing. Check out our latest analysis for Andhra Bank
Was ANDHRABANK’s weak performance lately a part of a long-term decline?
I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to examine many different companies in a uniform manner using the latest information. For Andhra Bank, its most recent trailing-twelve-month earnings is ₹2.07B, which, relative to last year’s figure, has declined by a substantial -62.89%. Given that these figures may be relatively nearsighted, I’ve calculated an annualized five-year value for ANDHRABANK’s earnings, which stands at ₹7.47B This doesn’t look much better, as earnings seem to have gradually been declining over time.Why could this be happening? Let’s examine what’s transpiring with margins and if the rest of the industry is experiencing the hit as well. Revenue growth over the past few years, has been positive, nevertheless earnings growth has been falling. This suggest that Andhra Bank has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the IN banks industry has been growing its average earnings by double-digit 14.40% over the past twelve months, and a flatter 1.07% over the last five years. This means that whatever uplift the industry is benefiting from, Andhra Bank has not been able to gain as much as its average peer.
What does this mean?
Andhra Bank’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Usually companies that endure an extended period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry disruption and growth. I suggest you continue to research Andhra Bank to get a more holistic view 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.