Does Lypsa Gems & Jewellery Limited’s (NSE:LYPSAGEMS) Past Performance Indicate A Weaker Future?

For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Lypsa Gems & Jewellery Limited (NSE:LYPSAGEMS) useful as an attempt to give more color around how Lypsa Gems & Jewellery is currently performing.

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Was LYPSAGEMS’s recent earnings decline worse than the long-term trend and the industry?

LYPSAGEMS’s trailing twelve-month earnings (from 30 September 2018) of ₹235m has declined by -17% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 20%, indicating the rate at which LYPSAGEMS is growing has slowed down. Why is this? Well, let’s look at what’s going on with margins and if the whole industry is experiencing the hit as well.

NSEI:LYPSAGEMS Income Statement Export January 21st 19
NSEI:LYPSAGEMS Income Statement Export January 21st 19

In terms of returns from investment, Lypsa Gems & Jewellery has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 6.6% exceeds the IN Luxury industry of 5.8%, indicating Lypsa Gems & Jewellery has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Lypsa Gems & Jewellery’s debt level, has declined over the past 3 years from 47% to 17%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have unpredictable earnings, can have many factors affecting its business. I recommend you continue to research Lypsa Gems & Jewellery to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for LYPSAGEMS’s future growth? Take a look at our free research report of analyst consensus for LYPSAGEMS’s outlook.
  2. Financial Health: Are LYPSAGEMS’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.
  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 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 editorial-team@simplywallst.com.