Understanding Edelweiss Financial Services Limited’s (BOM:532922) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Edelweiss Financial Services is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. View out our latest analysis for Edelweiss Financial Services
Were 532922’s earnings stronger than its past performances and the industry?532922’s trailing twelve-month earnings (from 31 March 2018) of ₹8.90b has jumped 48.52% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 27.67%, indicating the rate at which 532922 is growing has accelerated. How has it been able to do this? Well, let’s take a look at whether it is solely a result of industry tailwinds, or if Edelweiss Financial Services has experienced some company-specific growth.
The hike in earnings seems to be supported by a strong top-line increase outpacing its growth rate of costs. Though this has caused a margin contraction, it has made Edelweiss Financial Services more profitable. Eyeballing growth from a sector-level, the IN capital markets industry has been growing its average earnings by double-digit 38.33% over the past year, and 17.55% over the past five years. This shows that whatever tailwind the industry is deriving benefit from, Edelweiss Financial Services is able to leverage this to its advantage.In terms of returns from investment, Edelweiss Financial Services has not invested its equity funds well, leading to a 11.11% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 1.40% is below the IN Capital Markets industry of 3.91%, indicating Edelweiss Financial Services’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Edelweiss Financial Services’s debt level, has declined over the past 3 years from 4.41% to 3.80%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 432.75% to 544.04% over the past 5 years.
What does this mean?
Though Edelweiss Financial Services’s past data is helpful, it is only one aspect of my investment thesis. While Edelweiss Financial Services has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I recommend you continue to research Edelweiss Financial Services to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for 532922’s future growth? Take a look at our free research report of analyst consensus for 532922’s outlook.
- Financial Health: Is 532922’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.
- 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.