Does Vardhman Acrylics Limited's (NSE:VARDHACRLC) -11% Earnings Drop Reflect A Longer Term Trend?

Simply Wall St
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When Vardhman Acrylics Limited (NSE:VARDHACRLC) released its most recent earnings update (31 March 2019), I compared it against two factor: its historical earnings track record, and the performance of its industry peers on average. Being able to interpret how well Vardhman Acrylics has done so far requires weighing its performance against a benchmark, rather than looking at a standalone number at a point in time. In this article, I've summarized the key takeaways on how I see VARDHACRLC has performed.

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Check out our latest analysis for Vardhman Acrylics

How Well Did VARDHACRLC Perform?

VARDHACRLC's trailing twelve-month earnings (from 31 March 2019) of ₹345m has declined by -11% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 1.9%, indicating the rate at which VARDHACRLC 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 entire industry is experiencing the hit as well.

NSEI:VARDHACRLC Income Statement, May 27th 2019
NSEI:VARDHACRLC Income Statement, May 27th 2019

In terms of returns from investment, Vardhman Acrylics has fallen short of achieving a 20% return on equity (ROE), recording 10% instead. However, its return on assets (ROA) of 7.7% exceeds the IN Luxury industry of 6.1%, indicating Vardhman Acrylics has used its assets more efficiently. Though, its return on capital (ROC), which also accounts for Vardhman Acrylics’s debt level, has declined over the past 3 years from 12% to 6.3%.

What does this mean?

While past data is useful, it doesn’t tell the whole story. Typically companies that experience an extended period of reduction in earnings are undergoing some sort of reinvestment phase in order to keep up with the recent industry disruption and growth. I recommend you continue to research Vardhman Acrylics to get a better picture of the stock by looking at:

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

  2. Financial Health: Are VARDHACRLC’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.

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