After reading Cadila Healthcare Limited’s (NSEI:CADILAHC) most recent earnings announcement (31 December 2017), I found it useful to look back at how the company has performed in the past and compare this against the latest numbers. As a long term investor, I pay close attention to earnings trend, rather than the figures published at one point in time. I also compare against an industry benchmark to check whether Cadila Healthcare’s performance has been impacted by industry movements. In this article I briefly touch on my key findings. Check out our latest analysis for Cadila Healthcare
Did CADILAHC beat its long-term earnings growth trend and its industry?
I prefer to use the ‘latest twelve-month’ data, which annualizes the latest 6-month earnings release, or some times, the latest annual report is already the most recent financial data. This method enables me to assess different companies in a uniform manner using the most relevant data points. For Cadila Healthcare, its latest earnings (trailing twelve month) is ₹15.71B, which compared to the previous year’s level, has moved up by 38.70%. Since these figures may be fairly short-term thinking, I have created an annualized five-year figure for Cadila Healthcare’s earnings, which stands at ₹10.26B This suggests that, generally, Cadila Healthcare has been able to steadily improve its bottom line over the last few years as well.
What’s the driver of this growth? Let’s take a look at if it is merely attributable to an industry uplift, or if Cadila Healthcare has experienced some company-specific growth. Over the last couple of years, Cadila Healthcare increased its bottom line faster than revenue by successfully controlling its costs. This resulted in a margin expansion and profitability over time. Viewing growth from a sector-level, the IN pharmaceuticals industry has been growing, albeit, at a muted single-digit rate of 6.41% in the previous year, and a substantial 14.36% over the past half a decade. This shows that whatever tailwind the industry is gaining from, Cadila Healthcare is capable of amplifying this to its advantage.
What does this mean?
Cadila Healthcare’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that have performed well in the past, such as Cadila Healthcare gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Cadila Healthcare to get a better picture of the stock by looking at: