For long term investors, improvement in profitability and outperformance against the industry can be important characteristics in a stock. In this article, I will take a look at BLS International Services Limited’s (NSE:BLS) track record on a high level, to give you some insight into how the company has been performing against its historical trend and its industry peers.
View our latest analysis for BLS International Services
Did BLS beat its long-term earnings growth trend and its industry?
BLS’s trailing twelve-month earnings (from 30 June 2018) of ₹1.02b has jumped 41.5% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 39.2%, indicating the rate at which BLS is growing has accelerated. What’s the driver of this growth? Let’s take a look at if it is merely attributable to an industry uplift, or if BLS International Services has experienced some company-specific growth.
In the past few years, BLS International Services grew its bottom line faster than revenue by successfully controlling its costs. This brought about a margin expansion and profitability over time.
Eyeballing growth from a sector-level, the IN it industry has been growing its average earnings by double-digit 15.3% over the prior year, and 10.8% over the past five years. This growth is a median of profitable companies of 25 IT companies in IN including Bharatiya Global Infomedia, CyberTech Systems and Software and California Software. This means that any uplift the industry is benefiting from, BLS International Services is capable of leveraging this to its advantage.
In terms of returns from investment, BLS International Services has invested its equity funds well leading to a 38.9% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 24.3% exceeds the IN IT industry of 7.9%, indicating BLS International Services has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for BLS International Services’s debt level, has increased over the past 3 years from 28.6% to 40.2%.
What does this mean?
BLS International Services’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research BLS International Services to get a better picture of the stock by looking at: