For investors with a long-term horizon, examining earnings trend over time and against industry peers is more insightful than looking at an earnings announcement in one point in time. Investors may find my commentary, albeit very high-level and brief, on PSL Limited (NSEI:PSL) useful as an attempt to give more color around how PSL is currently performing. See our latest analysis for PSL
Commentary On PSL’s Past Performance
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 blend allows me to examine various companies on a more comparable basis, using new information. For PSL, its latest earnings is -₹7,526.0M, which, in comparison to the previous year’s level, has become less negative. Given that these values may be somewhat myopic, I’ve calculated an annualized five-year value for PSL’s earnings, which stands at -₹4,598.1M. This means that, PSL has historically performed better than recently, despite the fact that it seems like earnings are now heading back towards a more favorable position once more.
We can further evaluate PSL’s loss by looking at what’s going on in the industry as well as within the company. Firstly, I want to briefly look into the line items. Revenue growth over the last few years has been negative at -34.49%. The key to profitability here is to make sure the company’s cost growth is well-managed. Looking at growth from a sector-level, the IN machinery industry has been growing its average earnings by double-digit 14.32% in the past year, and a flatter -0.50% over the previous few years. This means that, while PSL is currently unprofitable, it may have only just been aided by the recent industry expansion, moving earnings towards to right direction.
What does this mean?
PSL’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to predict what will happen in the future and when. The most useful step is to assess company-specific issues PSL may be facing and whether management guidance has consistently been met in the past. You should continue to research PSL to get a more holistic view of the stock by looking at:
1. Financial Health: Is PSL’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.