Measuring Dr Reddy’s Laboratories Limited’s (NSEI:DRREDDY) track record of past performance is a useful exercise for investors. It enables us to understand whether or not the company has met or exceed expectations, which is an insightful signal for future performance. Today I will assess DRREDDY’s recent performance announced on 30 September 2017 and weigh these figures against its long-term trend and industry movements. See our latest analysis for Dr. Reddy’s Laboratories

Commentary On DRREDDY’s Past Performance

To account for any quarterly or half-yearly updates, I use data from the most recent 12 months, 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 allows me to examine different companies in a uniform manner using the most relevant data points. “For Dr. Reddy’s Laboratories, its “, most recent twelve-month earnings is ₹11,266.0M, which, against the prior year’s figure, has increased by a fairly soft 4.79%. Since these values are relatively short-term, I have calculated an annualized five-year value for Dr. Reddy’s Laboratories’s net income, which stands at ₹16,671.9M. This shows that, despite the fact that earnings growth from last year was positive, over the long run, Dr. Reddy’s Laboratories’s earnings have been falling on average.

Why is this? Well, let’s take a look at what’s transpiring with margins and whether the entire industry is feeling the heat. Revenue growth in the past couple of years, has been positive, however, earnings growth has been lagging behind meaning Dr. Reddy’s Laboratories has been ramping up its expenses by a lot more. This harms margins and earnings, and is not a sustainable practice. Scanning growth from a sector-level, the IN pharmaceuticals industry has been growing its average earnings by double-digit 11.44% over the past twelve months, and 14.21% over the past five years. This means whatever tailwind the industry is enjoying, Dr. Reddy’s Laboratories has not been able to realize the gains unlike its average peer.

What does this mean?

Though Dr. Reddy’s Laboratories’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth isn’t always indicative of a continued optimistic outlook. There may be factors that are affecting the entire industry hence the high industry growth rate over the same time frame. You should continue to research Dr. Reddy’s Laboratories to get a more holistic view of the stock by looking at: