In This Article:
After reading Grasim Industries Limited’s (NSE:GRASIM) most recent earnings announcement (31 March 2018), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. 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 Grasim Industries’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Grasim Industries
How Well Did GRASIM Perform?
GRASIM’s trailing twelve-month earnings (from 31 March 2018) of ₹26.79b has declined by -15.43% compared to the previous year. Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 1.63%, indicating the rate at which GRASIM is growing has slowed down. Why could this be happening? Well, let’s look at what’s occurring with margins and whether the rest of the industry is experiencing the hit as well.
Revenue growth in the past few years, has been positive, however, earnings growth has failed to keep up meaning Grasim Industries has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Viewing growth from a sector-level, the IN basic materials industry has been growing, albeit, at a muted single-digit rate of 6.63% over the previous year, and 8.25% over the past half a decade. This means that whatever tailwind the industry is enjoying, Grasim Industries has not been able to reap as much as its average peer.
In terms of returns from investment, Grasim Industries has not invested its equity funds well, leading to a 4.41% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 3.05% is below the IN Basic Materials industry of 7.09%, indicating Grasim Industries’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Grasim Industries’s debt level, has declined over the past 3 years from 7.88% to 3.60%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 36.88% to 80.13% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors affecting its business. You should continue to research Grasim Industries to get a more holistic view of the stock by looking at: