When Videocon Industries Limited (NSEI:VIDEOIND) released its most recent earnings update (31 March 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Videocon Industries performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see VIDEOIND has performed. Check out our latest analysis for Videocon Industries

Was VIDEOIND’s recent earnings decline worse than the long-term trend and the industry?

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 in a uniform manner using new information. For Videocon Industries, its most recent earnings (trailing twelve month) is -₹37.92B, which, in comparison to the previous year’s level, has become more negative. Since these figures are fairly myopic, I have calculated an annualized five-year value for VIDEOIND’s net income, which stands at -₹10.86B. This doesn’t seem to paint a better picture, as earnings seem to have consistently been getting more and more negative over time.

We can further analyze Videocon Industries’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade Videocon Industries has seen an annual decline in revenue of -2.45%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the IN consumer durables industry has been growing its average earnings by double-digit 18.17% in the past year, and 18.72% over the previous five years. This shows that any uplift the industry is profiting from, Videocon Industries has not been able to gain as much as its average peer.

What does this mean?

Though Videocon Industries’s past data is helpful, it is only one aspect of my investment thesis. Companies that incur net loss is always difficult to envisage what will happen in the future and when. The most valuable step is to examine company-specific issues Videocon Industries may be facing and whether management guidance has consistently been met in the past. You should continue to research Videocon Industries to get a more holistic view of the stock by looking at:

1. Financial Health: Is VIDEOIND’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.