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Today I will take a look at Central Depository Services (India) Limited’s (NSE:CDSL) most recent earnings update (31 December 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the capital markets industry performed. As an investor, I find it beneficial to assess CDSL’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
Were CDSL’s earnings stronger than its past performances and the industry?
CDSL’s trailing twelve-month earnings (from 31 December 2018) of ₹1.1b has increased by 5.0% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 15%, indicating the rate at which CDSL is growing has slowed down. To understand what’s happening, let’s examine what’s occurring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Central Depository Services (India) has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 14% exceeds the IN Capital Markets industry of 4.0%, indicating Central Depository Services (India) has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Central Depository Services (India)’s debt level, has increased over the past 3 years from 20% to 22%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Central Depository Services (India) has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Central Depository Services (India) to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for CDSL’s future growth? Take a look at our free research report of analyst consensus for CDSL’s outlook.
- Financial Health: Are CDSL’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 December 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 firstname.lastname@example.org.