In This Article:
Today I will take a look at Omaxe Limited’s (NSE:OMAXE) most recent earnings update (30 June 2018) and compare these latest figures against its performance over the past few years, as well as how the rest of the real estate industry performed. As an investor, I find it beneficial to assess OMAXE’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
View our latest analysis for Omaxe
Did OMAXE perform worse than its track record and industry?
OMAXE’s trailing twelve-month earnings (from 30 June 2018) of ₹697m has declined by -13% 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 0.1%, indicating the rate at which OMAXE is growing has slowed down. What could be happening here? Let’s examine what’s going on with margins and whether the entire industry is experiencing the hit as well.
Over the past few years, revenue growth has been lagging behind earnings, which implies that Omaxe’s bottom line has been propelled by unsustainable cost-reductions.
Looking at growth from a sector-level, the IN real estate industry has been enduring some headwinds over the past year, leading to an average earnings drop of -9.3%. This is a significant change, given that the industry has constantly been delivering a a notable growth of 11% in the past half a decade. This growth is a median of profitable companies of 25 Real Estate companies in IN including Vijay Shanthi Builders, Manas Properties and Binny. This means whatever near-term headwind the industry is enduring, it’s hitting Omaxe harder than its peers.
In terms of returns from investment, Omaxe has fallen short of achieving a 20% return on equity (ROE), recording 3.1% instead. Furthermore, its return on assets (ROA) of 2.2% is below the IN Real Estate industry of 2.9%, indicating Omaxe’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for Omaxe’s debt level, has declined over the past 3 years from 3.9% to 3.1%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 37% to 81% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. In some cases, companies that face an extended period of diminishing earnings are going through some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a indicator of a structural change, which makes Omaxe and its peers a riskier investment. You should continue to research Omaxe to get a better picture of the stock by looking at: