With analysts expecting La Opala RG Limited (BOM:526947) to record robust earnings growth of 13.55% annualised over the few years to come, let’s stop and think through this strong vision. It is crucial for investors to do this, so they can judge the underlying components responsible for causing this growth, because the sustainability of returns to shareholders can be impacted on in different ways. To get a preliminary understanding, I will try to evaluate La Opala RG’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.View out our latest analysis for La Opala RG
A closer look at 526947’s profit margin
At a high level, a company’s ability to earn on their sales efforts can play an important role in determining shareholder value. By calculating 526947’s profit margin, we can take a closer look at this ability and use it to understand what is driving earnings growth.
Margin Calculation for 526947
Profit Margin = Net Income ÷ Revenue
∴ Profit Margin = ₹734.38m ÷ ₹2.59b = 28.32%
The past five years have seen La Opala RG’s margin expand, due to 24.68% in average net income growth exceeding a 14.48% average growth in revenue, indicating that that the previous revenue growth has been accompanied by a growing portion translated in to earnings. 526947’s most recent margin of 28.32% appears to follow this trend, indicating that earnings growth has likely been driven through improved cost management alongside the benefits of revenue growth.
What can we tell from future expectations?
Based on future expectations, 526947’s profit margin will transition into relative stability, with an expectation of 14.47% in annual revenue growth and annual net income growth forecasted at 13.55%. This suggests future earnings growth is driven further by sound cost management alongside revenue increases, which is maintaining the incremental amount of net income that is retained from the forecasted revenue growth. However, those interested in the company should remember that a stagnating margin can hold various implications on the company’s performance depending on how it operates, which makes further research very important.
For 526947, I’ve compiled three pertinent aspects you should further examine:
- 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 526947 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 526947 is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of 526947? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!