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 Infinite Computer Solutions (India) Limited (NSE:INFINITE) useful as an attempt to give more color around how Infinite Computer Solutions (India) is currently performing. See our latest analysis for Infinite Computer Solutions (India)
Did INFINITE perform worse than its track record and industry?INFINITE’s trailing twelve-month earnings (from 31 March 2018) of ₹1.12b has declined by -7.60% 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 -0.71%, indicating the rate at which INFINITE is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the whole industry is experiencing the hit as well.
Revenue growth over the past couple of years, has been positive, yet earnings growth has been falling. This implies that Infinite Computer Solutions (India) has been ramping up expenses, which is harming margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the IN it industry has been growing, albeit, at a muted single-digit rate of 7.83% over the previous year, and a substantial 10.95% over the past half a decade. This growth is a median of profitable companies of 25 IT companies in IN including Bharatiya Global Infomedia, Bharatiya Global Infomedia and Computer Point. This shows that any uplift the industry is benefiting from, Infinite Computer Solutions (India) has not been able to gain as much as its average peer.In terms of returns from investment, Infinite Computer Solutions (India) has not invested its equity funds well, leading to a 11.34% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 5.98% is below the IN IT industry of 8.83%, indicating Infinite Computer Solutions (India)’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Infinite Computer Solutions (India)’s debt level, has declined over the past 3 years from 17.59% to 16.91%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 14.40% to 17.02% over the past 5 years.
What does this mean?
Infinite Computer Solutions (India)’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Typically companies that endure a prolonged period of reduction in earnings are going through some sort of reinvestment phase in order to keep up with the recent industry growth and disruption. I recommend you continue to research Infinite Computer Solutions (India) to get a more holistic view of the stock by looking at:
- 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.
- Financial Health: Is 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.
- 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.