Assessing Venky’s (India) Limited’s (NSE:VENKYS) 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 Venky’s (India) is doing by comparing its most recent earnings with its historical trend, in addition to the performance of its food industry peers.
View our latest analysis for Venky’s (India)
How VENKYS fared against its long-term earnings performance and its industry
VENKYS’s trailing twelve-month earnings (from 30 June 2018) of ₹2.19b has jumped 61.22% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 33.29%, indicating the rate at which VENKYS is growing has accelerated. How has it been able to do this? Let’s take a look at whether it is merely a result of an industry uplift, or if Venky’s (India) has experienced some company-specific growth.
Over the last few years, Venky’s (India) increased its bottom line faster than revenue by efficiently controlling its costs. This resulted in a margin expansion and profitability over time. Inspecting growth from a sector-level, the IN food industry has been growing its average earnings by double-digit 12.36% in the previous twelve months, and 17.02% over the past five. This growth is a median of profitable companies of 25 Food companies in IN including Omega Ag Seeds Punjab, Ponni Sugars (Erode) and Ponni Sugars (Erode). This means whatever tailwind the industry is enjoying, Venky’s (India) is able to leverage this to its advantage.
In terms of returns from investment, Venky’s (India) has invested its equity funds well leading to a 30.34% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 18.48% exceeds the IN Food industry of 7.35%, indicating Venky’s (India) has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Venky’s (India)’s debt level, has increased over the past 3 years from 7.36% to 41.86%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 93.68% to 50.25% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Venky’s (India) has a good historical track record with positive growth and profitability, there’s no certainty that this will extrapolate into the future. I suggest you continue to research Venky’s (India) to get a more holistic view of the stock by looking at: