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After looking at Globus Spirits Limited’s (NSEI:GLOBUSSPR) latest earnings announcement (31 March 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Globus Spirits’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. View our latest analysis for Globus Spirits
Was GLOBUSSPR weak performance lately part of a long-term decline?
I look at 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 enables me to analyze many different companies on a more comparable basis, using the most relevant data points. For Globus Spirits, its latest earnings (trailing twelve month) is ₹73.51M, which, in comparison to last year’s figure, has dropped by -26.77%. Given that these figures may be somewhat short-term thinking, I’ve estimated an annualized five-year value for Globus Spirits’s earnings, which stands at ₹230.88M This doesn’t look much better, as earnings seem to have consistently been falling over the longer term.
Why could this be happening? Well, let’s take a look at what’s going on with margins and if the rest of the industry is experiencing the hit as well. Revenue growth in the past couple of years, has been positive, yet earnings growth has been deteriorating. This means Globus Spirits has been ramping up expenses, which is hurting margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the IN beverage industry has been growing, albeit, at a subdued single-digit rate of 6.93% in the past twelve months, and a flatter 1.67% over the past half a decade. This suggests that any uplift the industry is enjoying, Globus Spirits has not been able to realize the gains unlike its industry peers.
What does this mean?
Though Globus Spirits’s past data is helpful, it is only one aspect of my investment thesis. In some cases, companies that face a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and growth. I suggest you continue to research Globus Spirits to get a more holistic view of the stock by looking at: