Understanding Rainbow Papers Limited’s (NSEI:RAINBOWPAP) performance as a company requires examining more than earnings from one point in time. Today I will take you through a basic sense check to gain perspective on how Rainbow Papers is doing by evaluating its latest earnings with its longer term trend as well as its industry peers’ performance over the same period. View our latest analysis for Rainbow Papers
How Did RAINBOWPAP’s Recent Performance Stack Up Against Its Past?
I like to 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 method allows me to assess many different companies in a uniform manner using the latest information. For Rainbow Papers, its latest twelve-month earnings is -₹2,255.6M, which, against last year’s figure, has become less negative. Since these figures are fairly myopic, I’ve estimated an annualized five-year figure for Rainbow Papers’s earnings, which stands at -₹660.7M. This shows that, Rainbow Papers has historically performed better than recently, while it seems like earnings are now heading back in the right direction again.
Additionally, we can assess Rainbow Papers’s loss by looking at what’s going on in the industry as well as within the company. Initially, I want to quickly look into the line items. Revenue growth over the last couple of years has been negative at -6.19%. The key to profitability here is to make sure the company’s cost growth is well-managed. Inspecting growth from a sector-level, the IN forestry industry has been growing its average earnings by double-digit 17.48% over the prior twelve months, and 17.72% over the past couple of years. This suggests that, even though Rainbow Papers is currently unprofitable, it may have been aided by industry tailwinds, moving earnings into a more favorable position.
What does this mean?
Though Rainbow Papers’s past data is helpful, it is only one aspect of my investment thesis. With companies that are currently loss-making, it is always difficult to envisage what will happen in the future and when. The most valuable step is to examine company-specific issues Rainbow Papers may be facing and whether management guidance has regularly been met in the past. I suggest you continue to research Rainbow Papers to get a more holistic view of the stock by looking at:
1. Financial Health: Is RAINBOWPAP’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.