In This Article:
Today I will take a look at Munjal Auto Industries Limited's (NSE:MUNJALAU) most recent earnings update (31 March 2019) and compare these latest figures against its performance over the past few years, as well as how the rest of the auto components industry performed. As an investor, I find it beneficial to assess MUNJALAU’s trend over the short-to-medium term in order to gauge whether or not the company is able to meet its goals, and ultimately sustainably grow over time.
View our latest analysis for Munjal Auto Industries
Was MUNJALAU's weak performance lately a part of a long-term decline?
MUNJALAU's trailing twelve-month earnings (from 31 March 2019) of ₹360m has declined by -14% 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 -3.1%, indicating the rate at which MUNJALAU is growing has slowed down. What could be happening here? Let's examine what's transpiring with margins and whether the entire industry is experiencing the hit as well.
In terms of returns from investment, Munjal Auto Industries has fallen short of achieving a 20% return on equity (ROE), recording 12% instead. Furthermore, its return on assets (ROA) of 7.1% is below the IN Auto Components industry of 7.7%, indicating Munjal Auto Industries's are utilized less efficiently. However, its return on capital (ROC), which also accounts for Munjal Auto Industries’s debt level, has increased over the past 3 years from 11% to 14%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 44% to 12% over the past 5 years.
What does this mean?
Though Munjal Auto Industries's past data is helpful, it is only one aspect of my investment thesis. Typically companies that face a prolonged period of diminishing earnings are undergoing some sort of reinvestment phase However, if the whole industry is struggling to grow over time, it may be a sign of a structural change, which makes Munjal Auto Industries and its peers a riskier investment. I recommend you continue to research Munjal Auto Industries to get a more holistic view of the stock by looking at:
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Future Outlook: What are well-informed industry analysts predicting for MUNJALAU’s future growth? Take a look at our free research report of analyst consensus for MUNJALAU’s outlook.
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Financial Health: Are MUNJALAU’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.
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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.