IDBI Bank Limited (NSE:IDBI): Does The -39.69% Earnings Drop Reflect A Longer Term Trend?
For investors, increase in profitability and industry-beating performance can be essential considerations in an investment. Below, I will examine IDBI Bank Limited’s (NSEI:IDBI) track record on a high level, to give you some insight into how the company has been performing against its long term trend and its industry peers. See our latest analysis for IDBI Bank
Was IDBI’s recent earnings decline worse than the long-term trend and the industry?
I use data from the most recent 12 months, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This blend allows me to examine different companies on a similar basis, using the latest information. For IDBI Bank, its most recent bottom-line (trailing twelve month) is -₹50.16B, which, relative to last year’s figure, has become more negative. Given that these values may be relatively myopic, I’ve estimated an annualized five-year figure for IDBI Bank’s net income, which stands at -₹4.37B. This doesn’t seem to paint a better picture, as earnings seem to have gradually been getting more and more negative over time.
We can further assess IDBI Bank’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past half a decade IDBI Bank has seen an annual decline in revenue of -30.42%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Eyeballing growth from a sector-level, the IN banks industry has been growing its average earnings by double-digit 10.02% in the past twelve months, and a flatter 1.07% over the previous five years. This shows that whatever uplift the industry is deriving benefit from, IDBI Bank has not been able to reap as much as its industry peers.
What does this mean?
IDBI Bank’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that incur net loss is always hard to predict what will occur going forward, and when. The most valuable step is to examine company-specific issues IDBI Bank may be facing and whether management guidance has steadily been met in the past. I suggest you continue to research IDBI Bank to get a more holistic view of the stock by looking at:
1. Financial Health: Is IDBI’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.
2. 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 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.
