PVR’s encouraging earnings sentiment has analysts expecting material growth of 81.58% in the coming year, but let’s stop and evaluate this appraisal. Those invested in the stock should contemplate the factors that are spurring this growth, as there are certain implications that can impact on shareholder return. To get some insight, this article will interpret PVR’s margin performance so investors can evaluate the revenue and cost drivers behind future earnings projections and understand how they may impact on returns compared to the industry.Check out our latest analysis for PVR
A closer look at PVR’s profit margin
In general, the value that accrues to equity holders is partly reliant on the ability of a company to convert sales revenue in to earnings. By calculating PVR’s profit margin, we can take a closer look at this ability and use it to understand what is driving earnings growth.
Margin Calculation for PVR
Profit Margin = Net Income ÷ Revenue
∴ Profit Margin = 935.30 Million ÷ 22.05 Billion = 4.24%
The past five years have seen PVR’s margin expand, with 26.33% in average net income growth exceeding 23.69% in average revenue growth, indicating that that the previous revenue growth has been acompanied by a growing portion translated in to earnings. PVR’s most recent margin of 4.24% appears to follow this trend, which could imply improved cost efficiency as well as increasing revenue contributed to the previous earnings growth.
Using PVR’s margin expectations as a way to understand projections for the future
Forward looking projections suggest margins will keep on expanding, with 16.37% in expected annual revenue growth and annual net income growth forecasted at 33.63%. This suggests future earnings growth is driven further by enhanced cost efficiency alongside revenue increases, which is enlarging the incremental amount of net income that is retained from the forecasted revenue growth. Despite this, those watching the stock must know a expanding margin can mean different things for different companies, thus more detailed research is essential. Generally, it is useful to judge profit margin and its implication on return in comparison to other companies who share similar traits. For PVR, future profit margin is expected to expand simultaneously with margins in the Media industry, and at the same time, PVR’s forecasted ROE of 14.95% exceeds that of the expected 7.40% ROE of the industry (note that this observation is also influenced by relative debt levels). This suggests that analysts expect PVR’s return per dollar of equity will exceed the industry due to the earnings attributes identified in our margin analysis. But before moving forward, it must be remembered that bottom line earnings and profit margins are susceptible to being manipulated and don’t always give the full picture. Thus, it is essential to run your own analysis on PVR’s future earnings whilst maintaining a watchful eye over the sustainability of their cost management methods and the runway for top line growth.
For PVR, I’ve put together three key aspects you should look at:
- 1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 2. Valuation: What is PVR worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether PVR is currently mispriced by the market.
- 3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of PVR? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!