In this article, I will take a look at Alchemist Limited’s (NSEI:ALCHEM) most recent earnings update (31 March 2017) and compare these latest figures against its performance over the past few years, along with how the rest of ALCHEM’s industry performed. As a long-term investor, I find it useful to analyze the company’s trend over time in order to estimate whether or not the company is able to meet its goals, and eventually grow sustainably over time. See our latest analysis for Alchemist
Despite a decline, did ALCHEM underperform the long-term trend and the industry?
I use the ‘latest twelve-month’ data, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This technique enables me to analyze different companies in a uniform manner using new information. For Alchemist, its latest twelve-month earnings is -₹1,072.0M, which, relative to the previous year’s figure, has become more negative. Given that these values are somewhat myopic, I have computed an annualized five-year value for Alchemist’s earnings, which stands at ₹37.8M.
Additionally, we can evaluate Alchemist’s loss by looking at what has been happening in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last couple of years has been negative at -9.46%. The key to profitability here is to make sure the company’s cost growth is well-managed. Viewing growth from a sector-level, the IN food products industry has been growing its average earnings by double-digit 26.89% over the prior year, and 14.42% over the past couple of years. This means any uplift the industry is deriving benefit from, Alchemist has not been able to reap as much as its industry peers.
What does this mean?
Alchemist’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 assess company-specific issues Alchemist may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Alchemist to get a better picture of the stock by looking at:
1. Financial Health: Is ALCHEM’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. Valuation: What is ALCHEM worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether ALCHEM is currently mispriced by the market.