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After reading Kalyani Forge Limited's (NSE:KALYANIFRG) most recent earnings announcement (31 March 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Kalyani Forge's performance has been impacted by industry movements. In this article I briefly touch on my key findings.
Check out our latest analysis for Kalyani Forge
Commentary On KALYANIFRG's Past Performance
KALYANIFRG's trailing twelve-month earnings (from 31 March 2019) of ₹70m has increased by 6.0% 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 45%, indicating the rate at which KALYANIFRG is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Kalyani Forge has fallen short of achieving a 20% return on equity (ROE), recording 6.2% instead. Furthermore, its return on assets (ROA) of 6.4% is below the IN Auto Components industry of 7.6%, indicating Kalyani Forge's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Kalyani Forge’s debt level, has increased over the past 3 years from 4.1% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 58% to 34% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Kalyani Forge has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I recommend you continue to research Kalyani Forge 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 KALYANIFRG’s future growth? Take a look at our free research report of analyst consensus for KALYANIFRG’s outlook.
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Financial Health: Are KALYANIFRG’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.