In this commentary, I will examine SML Isuzu Limited’s (NSE:SMLISUZU) latest earnings update (30 September 2018) and compare these figures against its performance over the past couple of years, as well as how the rest of the machinery industry performed. As an investor, I find it beneficial to assess SMLISUZU’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.
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Did SMLISUZU’s recent earnings growth beat the long-term trend and the industry?
SMLISUZU’s trailing twelve-month earnings (from 30 September 2018) of ₹175m has jumped 12% compared to the previous year.
Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -2.6%, indicating the rate at which SMLISUZU is growing has accelerated. What’s enabled this growth? Let’s take a look at if it is only due to an industry uplift, or if SML Isuzu has seen some company-specific growth.
In terms of returns from investment, SML Isuzu has fallen short of achieving a 20% return on equity (ROE), recording 4.3% instead. Furthermore, its return on assets (ROA) of 2.9% is below the IN Machinery industry of 7.2%, indicating SML Isuzu’s are utilized less efficiently. And finally, its return on capital (ROC), which also accounts for SML Isuzu’s debt level, has declined over the past 3 years from 16% to 5.0%. This correlates with an increase in debt holding, with debt-to-equity ratio rising from 14% to 33% over the past 5 years.
What does this mean?
Though SML Isuzu’s past data is helpful, it is only one aspect of my investment thesis. Recent positive growth doesn’t necessarily mean it’s onwards and upwards for the company. There could be factors that are impacting the industry as a whole, thus the high industry growth rate over the same period of time. You should continue to research SML Isuzu to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for SMLISUZU’s future growth? Take a look at our free research report of analyst consensus for SMLISUZU’s outlook.
- Financial Health: Are SMLISUZU’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 September 2018. This may not be consistent with full year annual report figures.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.