When Radaan Mediaworks India Limited (NSEI:RADAAN) released its most recent earnings update (31 March 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Radaan Mediaworks India performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see RADAAN has performed. Check out our latest analysis for Radaan Mediaworks India
Was RADAAN’s recent earnings decline worse than the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This allows me to assess different stocks on a similar basis, using new information. For Radaan Mediaworks India, its latest earnings (trailing twelve month) is ₹7.94M, which, in comparison to the prior year’s level, has dropped by -9.71%. Since these values may be relatively short-term thinking, I’ve created an annualized five-year value for RADAAN’s net income, which stands at ₹11.88M This doesn’t look much better, since earnings seem to have gradually been deteriorating over time.What could be happening here? Let’s examine what’s occurring with margins and whether the rest of the industry is experiencing the hit as well. Although revenue growth in the last few years, has been negative, earnings growth has been deteriorating by even more, meaning Radaan Mediaworks India has been increasing its expenses. This hurts margins and earnings, and is not a sustainable practice. Looking at growth from a sector-level, the IN media industry has been relatively flat in terms of earnings growth in the prior year, evening out from a notable 14.73% over the previous five years. This shows that any recent headwind the industry is enduring, it’s hitting Radaan Mediaworks India harder than its peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that experience a drawn out period of decline in earnings are undergoing some sort of reinvestment phase Although, if the whole industry is struggling to grow over time, it may be a signal of a structural change, which makes Radaan Mediaworks India and its peers a higher risk investment. I suggest you continue to research Radaan Mediaworks India to get a more holistic view of the stock by looking at:
- 1. Financial Health: Is RADAAN’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.
- 2. Valuation: What is RADAAN 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 RADAAN is currently mispriced by the market.
- 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.