Today I will take a look at Rajesh Exports Limited’s (NSE:RAJESHEXPO) most recent earnings update (30 June 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the luxury industry performed. As an investor, I find it beneficial to assess RAJESHEXPO’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.

See our latest analysis for Rajesh Exports

Did RAJESHEXPO’s recent earnings growth beat the long-term trend and the industry?

RAJESHEXPO’s trailing twelve-month earnings (from 30 June 2018) of ₹13.7b has increased by 7.5% compared to the previous year.

However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 26%, indicating the rate at which RAJESHEXPO is growing has slowed down. To understand what’s happening, let’s examine what’s going on with margins and whether the rest of the industry is experiencing the hit as well.

Revenue growth in the past couple of years, has been positive, however, earnings growth has failed to keep up meaning Rajesh Exports has been growing its expenses by a lot more. This hurts margins and earnings, and is not a sustainable practice.

Looking at growth from a sector-level, the IN luxury industry has been growing its average earnings by double-digit 13% in the prior twelve months, and a less exciting 8.2% over the past five. This growth is a median of profitable companies of 25 Luxury companies in IN including Winsome Textile Industries, Morarjee Textiles and K G Denim. This shows that any uplift the industry is profiting from, Rajesh Exports has not been able to realize the gains unlike its average peer.

In terms of returns from investment, Rajesh Exports has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 8.2% exceeds the IN Luxury industry of 5.8%, indicating Rajesh Exports has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Rajesh Exports’s debt level, has declined over the past 3 years from 25% to 19%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 113% to 125% over the past 5 years.

What does this mean?

Though Rajesh Exports’s past data is helpful, it is only one aspect of my investment thesis. While Rajesh Exports has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. You should continue to research Rajesh Exports to get a more holistic view of the stock by looking at: