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Assessing Future Enterprises Limited’s (NSEI:FEL) performance as a company requires looking at more than just a years’ earnings data. Below, I will run you through a simple sense check to build perspective on how Future Enterprises is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its industrials industry peers. See our latest analysis for Future Enterprises
Was FEL’s weak performance lately a part of a long-term decline?
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 method enables me to assess different stocks on a similar basis, using the latest information. For Future Enterprises, its most recent bottom-line (trailing twelve month) is ₹69.00M, which, in comparison to the previous year’s level, has declined by a substantial -80.29%. Given that these figures are fairly myopic, I have calculated an annualized five-year figure for FEL’s net income, which stands at ₹1.06B This doesn’t seem to paint a better picture, since earnings seem to have gradually been declining over time.
Why is this? Well, let’s look at what’s occurring with margins and whether the rest of the industry is feeling the heat. Although revenue growth in the last couple of years, has been negative, earnings growth has been declining by even more, meaning Future Enterprises has been increasing its expenses. This harms margins and earnings, and is not a sustainable practice. Eyeballing growth from a sector-level, the IN industrials industry has been growing, albeit, at a subdued single-digit rate of 6.73% in the past twelve months, and a flatter 1.14% over the past five years. This means that any tailwind the industry is profiting from, Future Enterprises has not been able to gain as much as its average peer.
What does this mean?
Though Future Enterprises’s past data is helpful, it is only one aspect of my investment thesis. Typically companies that endure a drawn out period of diminishing earnings are going through some sort of reinvestment phase with the aim of keeping up with the recent industry expansion and disruption. I suggest you continue to research Future Enterprises to get a more holistic view of the stock by looking at:
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Financial Health: Is FEL’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 2018. This may not be consistent with full year annual report figures.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.