After reading Vadivarhe Speciality Chemicals Limited’s (NSEI:VSCL) latest earnings update (31 March 2017), I found it beneficial to look back at how the company has performed in the past and compare this against the most recent numbers. As a long-term investor I tend to pay attention to earnings trend, rather than a single number at one point in time. I also like to compare against an industry benchmark to understand whether VSCL has outperformed, or whether it is simply riding an industry wave. Below is a brief commentary on my key takeaways. See our latest analysis for Vadivarhe Speciality Chemicals
How Well Did VSCL Perform?
I use the ‘latest twelve-month’ data, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This enables me to analyze different stocks in a uniform manner using the most relevant data points. For Vadivarhe Speciality Chemicals, its latest earnings (trailing twelve month) is ₹60.11M, which, relative to the previous year’s level, has increased by 40.04%. Given that these figures may be fairly short-term, I have computed an annualized five-year value for Vadivarhe Speciality Chemicals’s net income, which stands at ₹16.12M This shows that, generally, Vadivarhe Speciality Chemicals has been able to gradually improve its earnings over the past couple of years as well.
How has it been able to do this? Let’s take a look at whether it is only attributable to an industry uplift, or if Vadivarhe Speciality Chemicals has seen some company-specific growth. Over the past couple of years, Vadivarhe Speciality Chemicals grew its bottom line faster than revenue by successfully controlling its costs. This brought about a margin expansion and profitability over time. Eyeballing growth from a sector-level, the IN chemicals industry has been growing its average earnings by double-digit 27.14% in the prior year, and 13.27% over the past five years. This shows that any uplift the industry is enjoying, Vadivarhe Speciality Chemicals is able to leverage this to its advantage.
What does this mean?
Though Vadivarhe Speciality Chemicals’s past data is helpful, it is only one aspect of my investment thesis. Companies that have performed well in the past, such as Vadivarhe Speciality Chemicals gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. I suggest you continue to research Vadivarhe Speciality Chemicals to get a more holistic view of the stock by looking at: