Today I will examine LGB Forge Limited’s (NSEI:LGBFORGE) latest earnings update (30 September 2017) and compare these figures against its performance over the past couple of years, in addition to how the rest of LGBFORGE’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. Check out our latest analysis for LGB Forge
Was LGBFORGE weak performance lately part of a long-term decline?
For the most up-to-date info, I use data from the most recent 12 months, which either annualizes the most recent 6-month earnings update, or in some cases, the most recent annual report is already the latest available financial data. This method allows me to examine various companies on a similar basis, using the most relevant data points. LGB Forge’s latest twelve-month earnings -₹15.7M, which, relative to the previous year’s level, has become more negative. Since these figures are relatively myopic, I have estimated an annualized five-year value for LGBFORGE’s earnings, which stands at -₹28.5M. This means that, while net income is negative, it has become less negative over the years.
Additionally, we can analyze LGB Forge’s loss by looking at what’s going on in the industry along with within the company. Initially, I want to quickly look into the line items. Revenue growth over the past couple of years has been negative at -7.57%. 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 previous year, and a flatter -0.50% over the past five. This means that whatever tailwind the industry is benefiting from, LGB Forge has not been able to leverage it as much as its industry peers.
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 difficult to predict what will happen in the future and when. The most useful step is to assess company-specific issues LGB Forge may be facing and whether management guidance has dependably been met in the past. I recommend you continue to research LGB Forge to get a better picture of the stock by looking at:
1. Financial Health: Is LGBFORGE’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.