After looking at PI Industries Limited’s (NSE:PIIND) latest earnings update (31 March 2018), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings.

See our latest analysis for PI Industries

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

PIIND’s trailing twelve-month earnings (from 31 March 2018) of ₹3.7b has declined by -20% 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 23%, indicating the rate at which PIIND is growing has slowed down. Why is this? Let’s examine what’s transpiring with margins and if the whole industry is experiencing the hit as well.

In terms of returns from investment, PI Industries has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 13% exceeds the IN Chemicals industry of 8.3%, indicating PI Industries has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for PI Industries’s debt level, has declined over the past 3 years from 34% to 20%.

What does this mean?

Though PI Industries’s past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have unpredictable earnings, can have many factors impacting its business. I recommend you continue to research PI Industries to get a better picture of the stock by looking at:

1. Future Outlook: What are well-informed industry analysts predicting for PIIND’s future growth? Take a look at our free research report of analyst consensus for PIIND’s outlook.

2. Financial Health: Are PIIND’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 31 March 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.