Does Ambuja Cements Limited’s (NSE:AMBUJACEM) 35.25% Earnings Growth Reflect The Long-Term Trend?
After looking at Ambuja Cements Limited’s (NSEI:AMBUJACEM) latest earnings announcement (31 December 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Ambuja Cements’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. See our latest analysis for Ambuja Cements
Did AMBUJACEM beat its long-term earnings growth trend and its industry?
I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This method enables me to assess different companies on a similar basis, using the latest information. For Ambuja Cements, its most recent bottom-line (trailing twelve month) is ₹15.16B, which, against the prior year’s figure, has risen by 35.25%. Since these values may be relatively short-term, I’ve estimated an annualized five-year figure for Ambuja Cements’s earnings, which stands at ₹12.39B This shows that, on average, Ambuja Cements has been able to gradually grow its net income over the last couple of years as well.
What’s enabled this growth? Well, let’s take a look at if it is merely due to industry tailwinds, or if Ambuja Cements has seen some company-specific growth. The climb in earnings seems to be propelled by a strong top-line increase outpacing its growth rate of costs. Though this has led to a margin contraction, it has made Ambuja Cements more profitable. Scanning growth from a sector-level, the IN basic materials industry has been growing its average earnings by double-digit 21.55% in the past twelve months, and a more subdued 6.26% over the previous five years. This shows that whatever uplift the industry is gaining from, Ambuja Cements is able to amplify this to its advantage.
What does this mean?
Though Ambuja Cements’s past data is helpful, it is only one aspect of my investment thesis. Positive growth and profitability are what investors like to see in a company’s track record, but how do we properly assess sustainability? You should continue to research Ambuja Cements to get a better picture of the stock by looking at:
1. Future Outlook: What are well-informed industry analysts predicting for AMBUJACEM’s future growth? Take a look at our free research report of analyst consensus for AMBUJACEM’s outlook.
2. Financial Health: Is AMBUJACEM’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 trailing twelve months from 31 December 2017. 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.
