For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Bhushan Steel Limited (NSEI:BHUSANSTL) useful as an attempt to give more color around how Bhushan Steel is currently performing. Check out our latest analysis for Bhushan Steel
Was BHUSANSTL’s recent earnings decline worse than the long-term trend and the industry?
To account for any quarterly or half-yearly updates, I use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method allows me to assess different stocks in a uniform manner using the latest information. For Bhushan Steel, its latest earnings (trailing twelve month) is -₹36,148.5M, which compared to the previous year’s figure, has become more negative. Given that these values may be fairly short-term, I’ve computed an annualized five-year figure for Bhushan Steel’s earnings, which stands at -₹2,427.9M. This doesn’t seem to paint a better picture, since earnings seem to have gradually been getting more and more negative over time.
Additionally, we can assess Bhushan Steel’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 couple of years has grown by a mere 7.01%. Given that top-line growth is also pretty flat, the key to profitability going forward would be controlling cost growth rates. Inspecting growth from a sector-level, the IN metals and mining industry has been growing its average earnings by double-digit 25.20% in the prior twelve months, and a more muted 4.59% over the previous few years. This means that any uplift the industry is profiting from, Bhushan Steel has not been able to gain as much as its industry peers.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that incur net loss is always difficult to envisage what will occur going forward, and when. The most insightful step is to assess company-specific issues Bhushan Steel may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Bhushan Steel to get a better picture of the stock by looking at:
1. Financial Health: Is BHUSANSTL’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.