When Pidilite Industries Limited (NSEI:PIDILITIND) released its most recent earnings update (30 June 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Understanding how Pidilite Industries performed requires a benchmark rather than trying to assess a standalone number at one point in time. Below is a quick commentary on how I see PIDILITIND has performed.
Have PIDILITIND's earnings improved against past performances and the industry?
PIDILITIND's trailing twelve-month earnings (from 30 June 2019) of ₹9.8b has increased by 0.5% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 14%, indicating the rate at which PIDILITIND is growing has slowed down. What could be happening here? Well, let's look at what's occurring with margins and if the rest of the industry is feeling the heat.
In terms of returns from investment, Pidilite Industries has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 16% exceeds the IN Chemicals industry of 8.9%, indicating Pidilite Industries has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Pidilite Industries’s debt level, has declined over the past 3 years from 39% to 28%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 2.4% to 2.6% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. While Pidilite Industries 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 Pidilite Industries to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for PIDILITIND’s future growth? Take a look at our free research report of analyst consensus for PIDILITIND’s outlook.
- Financial Health: Are PIDILITIND’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.
- 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.
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