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When Avenue Supermarts Limited (NSE:DMART) announced its most recent earnings (31 March 2019), I did two things: looked at its past earnings track record, then look at what is happening in the industry. Understanding how Avenue Supermarts 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 DMART has performed.
View our latest analysis for Avenue Supermarts
How Did DMART's Recent Performance Stack Up Against Its Past?
DMART's trailing twelve-month earnings (from 31 March 2019) of ₹9.0b has jumped 12% 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 34%, indicating the rate at which DMART is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s going on with margins and whether the rest of the industry is facing the same headwind.
In terms of returns from investment, Avenue Supermarts has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 14% exceeds the IN Consumer Retailing industry of 4.6%, indicating Avenue Supermarts has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Avenue Supermarts’s debt level, has increased over the past 3 years from 23% to 25%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 67% to 7.7% over the past 5 years.
What does this mean?
Though Avenue Supermarts's past data is helpful, it is only one aspect of my investment thesis. While Avenue Supermarts has a good historical track record with positive growth and profitability, there's no certainty that this will extrapolate into the future. I suggest you continue to research Avenue Supermarts to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for DMART’s future growth? Take a look at our free research report of analyst consensus for DMART’s outlook.
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Financial Health: Are DMART’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.