After looking at Jindal Steel & Power Limited’s (NSEI:JINDALSTEL) latest earnings announcement (30 September 2017), I found it useful to revisit the company’s performance in the past couple of years and assess this against the most recent figures. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is a crucial aspect. Below is a brief commentary on my key takeaways. See our latest analysis for JINDALSTEL
Did JINDALSTEL beat its long-term earnings growth trend and its industry?
For the most up-to-date info, I 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 analyze various companies in a uniform manner using the latest information. Jindal Steel & Power’s latest earnings -₹12,881.7M, which, in comparison to last year’s figure, has become less negative. Since these figures may be somewhat short-term, I’ve determined an annualized five-year value for Jindal Steel & Power’s net income, which stands at ₹9,208.8M.
Additionally, we can analyze Jindal Steel & Power’s loss by researching what has been happening in the industry along with within the company. Firstly, I want to briefly look into the line items. Revenue growth over last couple of years has risen by a mere 4.39%. Given that top-line growth is also pretty stale the key to profitability going forward would be managing cost growth rates. Inspecting growth from a sector-level, the IN metals and mining industry has been growing its average earnings by double-digit 27.08% over the previous year, and a less exciting 3.25% over the past couple of years. This means while Jindal Steel & Power is currently loss-making, it may have been aided by industry tailwinds, moving earnings towards to right direction.
What does this mean?
While past data is useful, it doesn’t tell the whole story. With companies that are currently loss-making, it is always hard to forecast what will happen in the future and when. The most insightful step is to examine company-specific issues Jindal Steel & Power may be facing and whether management guidance has regularly been met in the past. I recommend you continue to research Jindal Steel & Power to get a more holistic view of the stock by looking at: