As analysts project SJVN Limited (NSE:SJVN) to produce noticeable earnings growth of 24.48% annualised over the couple of years ahead, it’s necessary to take a moment and evaluate this strong vision. Those invested in the stock should contemplate the factors that are causing this projected increase, because the sustainability of returns to shareholders can be impacted on in different ways. To get a preliminary understanding, this article will interpret SJVN’s margin performance to assist in analysing the revenue and cost anatomy behind the earnings expectations for the future and the impact it has on shareholder returns relative to the wider industry.See our latest analysis for SJVN
Understanding SJVN’s earnings with profit margin
Attractive margins generally indicate a desirable ability to translate sales revenue in to earnings, and return for shareholders. Knowing the portion of top line revenue that is turned into net income helps to assess this ability whilst spotting profit drivers, and can be found by calculating SJVN’s profit margin.
Margin Calculation for SJVN
Profit Margin = Net Income ÷ Revenue
∴ Profit Margin = ₹12.22b ÷ ₹22.29b = 54.82%
There has been an expansion in SJVN’s margin over the past five years, as a result of average net income growth of 6.45% surpassing a 5.37% average growth in revenue, which suggests that the company has been able to convert a larger percentage of revenue into net income whilst grow their top line at the same time. The current 54.82% margin seems to continue this movement, which suggests that the increase in net income has likely occurred from a combination of enhanced cost efficiency as well as top line growth.
Using SJVN’s margin expectations as a way to understand projections for the future
It is expected that margins will expand further, with annual revenue growth tipped at 16.74% and 24.48% earnings growth expected annually. 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 interested in the company should remember that a expanding margin can mean different things for different companies, thus more detailed research is essential.
For SJVN, I’ve compiled three important aspects you should look at:
- 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.
- Valuation: What is SJVN 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 SJVN is currently mispriced by the market.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of SJVN? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!