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In this commentary, I will examine Bannari Amman Spinning Mills Limited’s (NSEI:BASML) latest earnings update (31 March 2017) and compare these figures against its performance over the past couple of years, as well as how the rest of the luxury industry performed. As an investor, I find it beneficial to assess BASML’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. Check out our latest analysis for Bannari Amman Spinning Mills

How Well Did BASML Perform?

For the purpose of this commentary, I like to 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 similar basis, using the most relevant data points. For Bannari Amman Spinning Mills, its latest trailing-twelve-month earnings is ₹201.78M, which compared to the prior year’s figure, has risen by a somewhat unexciting 3.28%. Since these values may be fairly short-term, I’ve calculated an annualized five-year figure for BASML’s earnings, which stands at ₹203.28M This suggests that, while earnings growth from last year was positive, over time, Bannari Amman Spinning Mills’s earnings have been diminishing on average.

Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is feeling the heat. Revenue growth over the past couple of years, has been positive, yet earnings growth has been deteriorating. This suggest that Bannari Amman Spinning Mills has been growing expenses, which is harming margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the IN luxury industry has been growing, albeit, at a muted single-digit rate of 5.78% in the prior year, and 9.38% over the past half a decade. This means that any tailwind the industry is benefiting from, Bannari Amman Spinning Mills has not been able to gain as much as its industry peers.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. There may be factors that are influencing the entire industry thus the high industry growth rate over the same period of time. You should continue to research Bannari Amman Spinning Mills to get a better picture of the stock by looking at:

• 1. Financial Health: Is BASML’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. 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.