Infinite Computer Solutions (India) Limited (NSE:INFINITE): Does The Earnings Decline Make It An Underperformer?

After reading Infinite Computer Solutions (India) Limited’s (NSE:INFINITE) latest earnings update (30 June 2018), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether INFINITE has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways.

View our latest analysis for Infinite Computer Solutions (India)

Despite a decline, did INFINITE underperform the long-term trend and the industry?

INFINITE’s trailing twelve-month earnings (from 30 June 2018) of ₹1.1b has declined by -5.0% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 2.4%, indicating the rate at which INFINITE is growing has slowed down. Why is this? Well, let’s look at what’s going on with margins and whether the rest of the industry is experiencing the hit as well.

NSEI:INFINITE Income Statement Export October 24th 18
NSEI:INFINITE Income Statement Export October 24th 18

In terms of returns from investment, Infinite Computer Solutions (India) has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. Furthermore, its return on assets (ROA) of 5.7% is below the IN IT industry of 7.9%, indicating Infinite Computer Solutions (India)’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Infinite Computer Solutions (India)’s debt level, has increased over the past 3 years from 17% to 18%.

What does this mean?

Though Infinite Computer Solutions (India)’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that endure an extended period of decline in earnings are undergoing some sort of reinvestment phase with the aim of keeping up with the latest industry expansion and disruption. I suggest you continue to research Infinite Computer Solutions (India) to get a better picture of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for INFINITE’s future growth? Take a look at our free research report of analyst consensus for INFINITE’s outlook.
  2. Financial Health: Are INFINITE’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 30 June 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.