When McNally Bharat Engineering Company Limited (NSEI:MBECL) announced its most recent earnings (31 March 2017), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how McNally Bharat Engineering 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 MBECL has performed. Check out our latest analysis for McNally Bharat Engineering
Could MBECL beat the long-term trend and outperform its industry?
I like to use data from the most recent 12 months, 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 technique allows me to examine many different companies in a uniform manner using the latest information. For McNally Bharat Engineering, its latest twelve-month earnings is -₹646.5M, which, in comparison to last year’s level, has become less negative. Given that these figures may be relatively short-term, I’ve created an annualized five-year value for MBECL’s earnings, which stands at -₹694.1M. This means though net income is negative, it has become less negative over the years.
Additionally, we can analyze McNally Bharat Engineering’s loss by researching what has been happening in the industry as well as within the company. Initially, I want to quickly look into the line items. Revenue growth over the last few years has been somewhat soft, remaining flat on average at -1.08%. Since top-line growth is also pretty stale the key to profitability in the future would be managing cost growth rates. Looking at growth from a sector-level, the IN construction and engineering industry has been growing its average earnings by double-digit 13.18% over the past year, and a less exciting 2.95% over the previous few years. This means though McNally Bharat Engineering is currently running a loss, it may have gained from industry tailwinds, moving earnings towards to right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most valuable step is to examine company-specific issues McNally Bharat Engineering may be facing and whether management guidance has consistently been met in the past. I recommend you continue to research McNally Bharat Engineering to get a more holistic view of the stock by looking at:
1. Financial Health: Is MBECL’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.