Coal India Limited’s (NSE:COALINDIA) Earnings Dropped -27.7%, Did Its Industry Show Weakness Too?
When Coal India Limited (NSEI:COALINDIA) announced its most recent earnings (30 September 2017), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Coal India has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I’ve summarized the key takeaways on how I see COALINDIA has performed. See our latest analysis for Coal India
How Did COALINDIA’s Recent Performance Stack Up Against Its Past?
For the most up-to-date info, I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This enables me to analyze different stocks on a more comparable basis, using the latest information. “For Coal India, its “, most recent twelve-month earnings is ₹83,086.9M, which, against last year’s figure, has plunged by -28.92%. Since these values may be fairly short-term thinking, I have created an annualized five-year value for Coal India’s net income, which stands at ₹137,437.7M. This doesn’t seem to paint a better picture, as earnings seem to have gradually been declining over the longer term.
What could be happening here? Let’s examine what’s going on with margins and whether the whole industry is feeling the heat. Revenue growth in the past couple of years, has been positive, however earnings growth has been falling. This means Coal India has been increasing expenses, which is hurting margins and earnings, and is not a sustainable practice. Inspecting growth from a sector-level, the IN oil and gas industry has been growing its average earnings by double-digit 45.95% in the prior twelve months, and a more muted 5.53% over the past five. This means that any uplift the industry is profiting from, Coal India has not been able to gain as much as its average peer.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Usually companies that experience an extended period of diminishing earnings are undergoing some sort of reinvestment phase in order to keep up with the latest industry expansion and disruption. I suggest you continue to research Coal India to get a more holistic view of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for COALINDIA’s future growth? Take a look at our free research report of analyst consensus for COALINDIA’s outlook.
2. Financial Health: Is COALINDIA’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.
3. 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 last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. 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.
