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Does Gujarat Alkalies and Chemicals Limited's (NSE:GUJALKALI) Past Performance Indicate A Stronger Future?

Simply Wall St

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After reading Gujarat Alkalies and Chemicals Limited's (NSE:GUJALKALI) most recent earnings announcement (31 March 2019), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways.

See our latest analysis for Gujarat Alkalies and Chemicals

How GUJALKALI fared against its long-term earnings performance and its industry

GUJALKALI's trailing twelve-month earnings (from 31 March 2019) of ₹6.9b has jumped 29% 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 32%, indicating the rate at which GUJALKALI is growing has slowed down. What could be happening here? Well, let's look at what's going on with margins and whether the whole industry is feeling the heat.

NSEI:GUJALKALI Income Statement, June 24th 2019

In terms of returns from investment, Gujarat Alkalies and Chemicals has fallen short of achieving a 20% return on equity (ROE), recording 16% instead. However, its return on assets (ROA) of 13% exceeds the IN Chemicals industry of 9.1%, indicating Gujarat Alkalies and Chemicals has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Gujarat Alkalies and Chemicals’s debt level, has increased over the past 3 years from 6.5% to 19%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 11% to 4.4% over the past 5 years.

What does this mean?

Gujarat Alkalies and Chemicals's track record can be a valuable insight into its earnings performance, but it certainly 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 recommend you continue to research Gujarat Alkalies and Chemicals to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for GUJALKALI’s future growth? Take a look at our free research report of analyst consensus for GUJALKALI’s outlook.
  2. Financial Health: Are GUJALKALI’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 March 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 editorial-team@simplywallst.com. 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.