In this commentary, I will examine Birla Cable Limited’s (NSEI:BIRLACABLE) latest earnings update (30 June 2019) and compare these figures against its performance over the past couple of years, as well as how the rest of the communications industry performed. As an investor, I find it beneficial to assess BIRLACABLE’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.
Did BIRLACABLE’s recent earnings growth beat the long-term trend and the industry?
BIRLACABLE’s trailing twelve-month earnings (from 30 June 2019) of ₹365m has jumped 33% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of 29%, indicating the rate at which BIRLACABLE is growing has accelerated. What’s enabled this growth? Let’s take a look at whether it is merely because of industry tailwinds, or if Birla Cable has experienced some company-specific growth.
In terms of returns from investment, Birla Cable has invested its equity funds well leading to a 21% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 11% exceeds the IN Communications industry of 6.2%, indicating Birla Cable has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Birla Cable’s debt level, has increased over the past 3 years from 15% to 29%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 61% to 35% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? I suggest you continue to research Birla Cable to get a better picture of the stock by looking at:
- Financial Health: Are BIRLACABLE’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.
- Valuation: What is BIRLACABLE worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether BIRLACABLE is currently mispriced by the market.
- 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 30 June 2019. This may not be consistent with full year annual report figures.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.
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