Was JK Cement Limited's (NSE:JKCEMENT) Earnings Growth Better Than The Industry's?

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 JK Cement Limited (NSE:JKCEMENT) useful as an attempt to give more color around how J.K. Cement is currently performing.

Check out our latest analysis for J.K. Cement

Did JKCEMENT's recent earnings growth beat the long-term trend and the industry?

JKCEMENT's trailing twelve-month earnings (from 31 March 2018) of ₹2.90b has jumped 27.83% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 6.61%, indicating the rate at which JKCEMENT is growing has accelerated. What's the driver of this growth? Well, let’s take a look at whether it is only a result of an industry uplift, or if J.K. Cement has experienced some company-specific growth.

The rise in earnings seems to be supported by a robust top-line increase overtaking its growth rate of expenses. Though this has led to a margin contraction, it has made J.K. Cement more profitable. Inspecting growth from a sector-level, the IN basic materials industry has been growing its average earnings by double-digit 13.23% in the previous year, and a more muted 7.66% over the previous five years. This growth is a median of profitable companies of 25 Basic Materials companies in IN including Shiva Granito Export, Inani Marbles and Industries and Kakatiya Cement Sugar and Industries. This suggests that any tailwind the industry is benefiting from, J.K. Cement is capable of amplifying this to its advantage.

In terms of returns from investment, J.K. Cement has not invested its equity funds well, leading to a 14.46% return on equity (ROE), below the sensible minimum of 20%. However, its return on assets (ROA) of 8.89% exceeds the IN Basic Materials industry of 7.09%, indicating J.K. Cement has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for J.K. Cement’s debt level, has increased over the past 3 years from 2.61% to 7.78%.

What does this mean?

J.K. Cement's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. Companies that have performed well in the past, such as J.K. Cement gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research J.K. Cement to get a more holistic view of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for JKCEMENT’s future growth? Take a look at our free research report of analyst consensus for JKCEMENT’s outlook.
2. Financial Health: Is JKCEMENT’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 March 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.

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.