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Understanding Greaves Cotton Limited's (NSE:GREAVESCOT) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Greaves Cotton is doing by evaluating its latest earnings with its longer term trend as well as its industry peers' performance over the same period.
View our latest analysis for Greaves Cotton
Was GREAVESCOT's recent earnings decline worse than the long-term trend and the industry?
GREAVESCOT's trailing twelve-month earnings (from 31 March 2019) of ₹1.6b has declined by -19% 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 9.7%, indicating the rate at which GREAVESCOT is growing has slowed down. Why is this? Well, let's look at what's going on with margins and whether the whole industry is facing the same headwind.
In terms of returns from investment, Greaves Cotton has fallen short of achieving a 20% return on equity (ROE), recording 17% instead. However, its return on assets (ROA) of 12% exceeds the IN Machinery industry of 7.7%, indicating Greaves Cotton has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Greaves Cotton’s debt level, has declined over the past 3 years from 24% to 21%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 0.009% to 1.1% over the past 5 years.
What does this mean?
Though Greaves Cotton's past data is helpful, it is only one aspect of my investment thesis. Companies that are profitable, but have capricious earnings, can have many factors affecting its business. You should continue to research Greaves Cotton 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 GREAVESCOT’s future growth? Take a look at our free research report of analyst consensus for GREAVESCOT’s outlook.
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Financial Health: Are GREAVESCOT’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.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.