Does Newgen Software Technologies Limited's (NSE:NEWGEN) 96.97% Earnings Growth Make It An Outperformer?

January 31, 2018
  •  Updated
October 07, 2022
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When Newgen Software Technologies Limited (NSEI:NEWGEN) announced its most recent earnings (31 March 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Newgen Software Technologies has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see NEWGEN has performed. Check out our latest analysis for Newgen Software Technologies

Were NEWGEN's earnings stronger than its past performances and the industry?

I prefer to use the ‘latest twelve-month’ data, 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 examine various companies on a similar basis, using the latest information. For Newgen Software Technologies, its most recent bottom-line (trailing twelve month) is ₹511.1M, which, relative to last year’s figure, has increased by a substantial 96.97%. Since these figures may be fairly nearsighted, I have created an annualized five-year value for Newgen Software Technologies's earnings, which stands at ₹397.7M. This shows that, generally, Newgen Software Technologies has been able to steadily grow its profits over the past few years as well.

NSEI:NEWGEN Income Statement Feb 1st 18
NSEI:NEWGEN Income Statement Feb 1st 18
What's enabled this growth? Well, let’s take a look at whether it is solely owing to an industry uplift, or if Newgen Software Technologies has seen some company-specific growth. The climb in earnings seems to be propelled by a substantial top-line increase overtaking its growth rate of expenses. Though this brought about a margin contraction, it has made Newgen Software Technologies more profitable. Looking at growth from a sector-level, the IN software industry has been growing its average earnings by double-digit 11.52% over the previous twelve months, and a less exciting 9.84% over the past five years. This shows that any tailwind the industry is deriving benefit from, Newgen Software Technologies is able to leverage this to its advantage.

What does this mean?

Newgen Software Technologies's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Newgen Software Technologies has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Newgen Software Technologies to get a better picture of the stock by looking at:

  • 1. Financial Health: Is NEWGEN’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 NEWGEN 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 NEWGEN 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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2017. This may not be consistent with full year annual report figures.

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.

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