Does Garden Silk Mills Limited’s (NSE:GARDENSILK) -23.87% Earnings Drop Reflect A Longer Term Trend?

Examining Garden Silk Mills Limited’s (NSEI:GARDENSILK) past track record of performance is an insightful exercise for investors. It allows us to reflect on whether or not the company has met or exceed expectations, which is a great indicator for future performance. Today I will assess GARDENSILK’s latest performance announced on 31 December 2017 and compare these figures to its longer term trend and industry movements. View our latest analysis for Garden Silk Mills

Despite a decline, did GARDENSILK underperform the long-term trend and the industry?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to examine many different companies on a more comparable basis, using new information. For Garden Silk Mills, its latest earnings (trailing twelve month) is -₹878.55M, which compared to the previous year’s figure, has become more negative. Since these values are relatively myopic, I have created an annualized five-year figure for Garden Silk Mills’s earnings, which stands at -₹977.60M. This means that, although net income is negative, it has become less negative over the years.

NSEI:GARDENSILK Income Statement Mar 20th 18
NSEI:GARDENSILK Income Statement Mar 20th 18
We can further examine Garden Silk Mills’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Garden Silk Mills has seen an annual decline in revenue of -6.82%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Inspecting growth from a sector-level, the IN luxury industry has been growing, albeit, at a unexciting single-digit rate of 5.78% over the past year, and 9.42% over the last five years. This means that any tailwind the industry is benefiting from, Garden Silk Mills has not been able to leverage it as much as its average peer.

What does this mean?

While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will occur going forward, and when. The most useful step is to assess company-specific issues Garden Silk Mills may be facing and whether management guidance has consistently been met in the past. You should continue to research Garden Silk Mills to get a better picture of the stock by looking at:

  • 1. Financial Health: Is GARDENSILK’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. Valuation: What is GARDENSILK 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 GARDENSILK is currently mispriced by the market.
  • 3. 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 December 2017. This may not be consistent with full year annual report figures.