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When 3M India Limited (NSE:3MINDIA) released its most recent earnings update (30 September 2018), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well 3M India has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see 3MINDIA has performed.
See our latest analysis for 3M India
Were 3MINDIA’s earnings stronger than its past performances and the industry?
3MINDIA’s trailing twelve-month earnings (from 30 September 2018) of ₹3.5b has jumped 35% 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 36%, indicating the rate at which 3MINDIA is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, 3M India has invested its equity funds well leading to a 20% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 13% exceeds the IN Industrials industry of 6.3%, indicating 3M India has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for 3M India’s debt level, has increased over the past 3 years from 23% to 29%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 31% to 0.4% over the past 5 years.
What does this mean?
Though 3M India’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research 3M India to get a better picture of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for 3MINDIA’s future growth? Take a look at our free research report of analyst consensus for 3MINDIA’s outlook.
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Financial Health: Are 3MINDIA’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.
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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 30 September 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.