Should You Be Concerned With Ujjivan Financial Services Limited's (NSE:UJJIVAN) -115.72% Earnings Drop?

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 Ujjivan Financial Services Limited (NSEI:UJJIVAN) useful as an attempt to give more color around how Ujjivan Financial Services is currently performing. See our latest analysis for Ujjivan Financial Services

Commentary On UJJIVAN's Past Performance

I look at 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 enables me to examine various companies in a uniform manner using the most relevant data points. For Ujjivan Financial Services, its most recent trailing-twelve-month earnings is -₹382.26M, which, against the previous year's level, has turned from positive to negative. Given that these figures are somewhat myopic, I have estimated an annualized five-year figure for Ujjivan Financial Services's net income, which stands at ₹1.05B.

We can further analyze Ujjivan Financial Services's loss by looking at what the industry has been experiencing over the past few years. Each year, for the last five years Ujjivan Financial Services's top-line has grown by 23.17% on average, signalling that the company is in a high-growth phase with expenses shooting ahead of revenues, leading to annual losses. Looking at growth from a sector-level, the IN consumer finance industry has been growing its average earnings by double-digit 21.81% in the prior year, and 10.38% over the past five years. This means that any tailwind the industry is deriving benefit from, Ujjivan Financial Services has not been able to realize the gains unlike its average peer.

What does this mean?

Ujjivan Financial Services's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that incur net loss is always difficult to predict what will happen in the future and when. The most insightful step is to assess company-specific issues Ujjivan Financial Services may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Ujjivan Financial Services to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for UJJIVAN’s future growth? Take a look at our free research report of analyst consensus for UJJIVAN’s outlook.
2. Financial Health: Is UJJIVAN’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 31 December 2017. This may not be consistent with full year annual report figures.

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Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.