For long-term investors, assessing earnings trend over time and against industry benchmarks is more beneficial than examining a single earnings announcement at a point in time. Investors may find my commentary, albeit very high-level and brief, on K.P.R. Mill Limited (NSE:KPRMILL) useful as an attempt to give more color around how K.P.R. Mill is currently performing.
Did KPRMILL beat its long-term earnings growth trend and its industry?
KPRMILL's trailing twelve-month earnings (from 30 June 2019) of ₹3.5b has jumped 16% 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 16%, indicating the rate at which KPRMILL is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s occurring with margins and whether the rest of the industry is feeling the heat.
In terms of returns from investment, K.P.R. Mill has fallen short of achieving a 20% return on equity (ROE), recording 19% instead. However, its return on assets (ROA) of 13% exceeds the IN Luxury industry of 6.2%, indicating K.P.R. Mill has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for K.P.R. Mill’s debt level, has increased over the past 3 years from 25% to 27%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 118% to 46% over the past 5 years.
What does this mean?
K.P.R. Mill'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? You should continue to research K.P.R. Mill to get a more holistic view of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for KPRMILL’s future growth? Take a look at our free research report of analyst consensus for KPRMILL’s outlook.
- Financial Health: Are KPRMILL’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.
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 email@example.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.