For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on Atul Auto Limited (NSEI:ATULAUTO) useful as an attempt to give more color around how Atul Auto is currently performing. Check out our latest analysis for Atul Auto

Was ATULAUTO’s recent earnings decline indicative of a tough track record?

To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method allows me to assess various companies on a more comparable basis, using new information. For Atul Auto, its most recent earnings (trailing twelve month) is ₹378.48M, which, in comparison to the previous year’s figure, has plunged by -20.15%. Since these values may be somewhat short-term thinking, I have computed an annualized five-year value for Atul Auto’s earnings, which stands at ₹301.19M This suggests that while earnings declined against last year, over the long run, Atul Auto’s profits have been rising on average.

How has it been able to do this? Let’s see whether it is solely because of industry tailwinds, or if Atul Auto has seen some company-specific growth. In the past few years, Atul Auto increased its bottom line faster than revenue by successfully controlling its costs. This brought about a margin expansion and profitability over time. Looking at growth from a sector-level, the IN auto industry has been relatively flat in terms of earnings growth in the prior twelve months, evening out from a solid 13.50% over the last five years. This shows that any recent headwind the industry is enduring, it’s hitting Atul Auto harder than its peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. I suggest you continue to research Atul Auto to get a more holistic view of the stock by looking at:

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

• 2. Financial Health: Is ATULAUTO’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 2017. This may not be consistent with full year annual report figures.
To help readers see pass 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.