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Does Rane Brake Lining Limited's (NSE:RBL) 6.5% Earnings Growth Reflect The Long-Term Trend?

Simply Wall St

For investors with a long-term horizon, assessing earnings trend over time and against industry benchmarks is more valuable than looking at a single earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on Rane Brake Lining Limited (NSE:RBL) useful as an attempt to give more color around how Rane Brake Lining is currently performing.

View our latest analysis for Rane Brake Lining

Were RBL's earnings stronger than its past performances and the industry?

RBL's trailing twelve-month earnings (from 30 June 2019) of ₹373m has increased by 6.5% 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 RBL is growing has slowed down. Why could this be happening? Well, let’s take a look at what’s transpiring with margins and whether the whole industry is experiencing the hit as well.

NSEI:RBL Income Statement, August 18th 2019

In terms of returns from investment, Rane Brake Lining has fallen short of achieving a 20% return on equity (ROE), recording 18% instead. However, its return on assets (ROA) of 10% exceeds the IN Auto Components industry of 7.7%, indicating Rane Brake Lining has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Rane Brake Lining’s debt level, has declined over the past 3 years from 29% to 20%.

What does this mean?

Rane Brake Lining's track record can be a valuable insight into its earnings performance, but it certainly doesn't tell the whole story. While Rane Brake Lining 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 Rane Brake Lining to get a better picture of the stock by looking at:

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