With analysts forecasting Container Corporation of India Limited (NSEI:CONCOR) to register solid earnings growth of 12.19% in the coming 12 months, let’s stop and think through this strong vision. Investors should consider the forces that are spurring this projected increase, as there are certain implications that can impact on shareholder return. To get a preliminary understanding, this article will interpret Container of India’s margin performance to assist in analysing the revenue and cost anatomy behind the earnings expectations for the future and the impact it has on shareholder returns relative to the wider industry.
What does CONCOR’s profit margin tell us?
Attractive margins generally indicate a desirable ability to translate sales revenue in to earnings, and return for shareholders. CONCOR’s profit margin will help us understand the extent of this ability, as well as identify the forces behind earnings expectations.
The past five years have seen Container of India’s margin contract, as a result of average revenue growth of 8.47% outstripping average net income growth of 1.01%, which suggests that a smaller percentage of revenue falls to the bottom line despite the fact revenue has increased over the previous 5 years. The current 14.34% margin seems to continue this movement, which could imply that increasing revenue has driven earnings growth rather than enhanced cost management.
How is Container of India’s margin expected to behave in the future and what could it mean for shareholders?
Forward looking projections suggest margins will shift towards expansion, with an expectation of 12.08% in annual revenue growth and annual net income growth forecasted at 18.73%. This suggests the previous earnings stability is expected to transition in to stronger growth through enhanced cost efficiency alongside revenue increases. But as a result of improved cost efficiency, net income growth is expected to exceed revenue growth, which is causing the expectation for margins to expand. Nonetheless, those watching the stock must know margin expansion can mean different things for different companies, thus more detailed research is essential.
Profit margins are commonly useful when employed as a comparitive measure to judge a business’ profit-making ability against its industry. For CONCOR, it is expected that profit margins will expand simultaneously with margins in the Transportation industry, whilst at the same time, CONCOR’s forecasted ROE and the expected ROE of the industry is roughly equal at 10.35% and 9.85% respectively, (note that relative debt levels need to be considered in this observation). This serves as an indication that analysts covering the stock expect the nature of Container of India’s earnings will result in a return per dollar of equity that is similar to the industry. However, margins use items on the income statement that are prone to being manipulated by various accounting measures, which can distort our analysis. Thus, it is essential to run your own analysis on Container of India’s future earnings whilst maintaining a watchful eye over the sustainability of their cost management methods and the runway for top line growth.
Margin Calculation for CONCOR: Profit Margin = Net Income ÷ Revenue; ∴ Profit Margin = 8.56 Billion ÷ 59.71 Billion = 14.34%
Intraday reports for Container Corporation of India Ltd.(CONCOR, 531344) Stock & Share Prices – January 23, 2018
Opening Bell !
Updated at 10.08 AM
The day started for Container Corporation of India Ltd. with an opening price of Rs. 1493.00 after closing at Rs. 1483.25 the previous day.
As compared to yesterday’s opening price, today’s opening price was observed to have increased 16.3 points.
Also, prices touched a high of Rs. 1500.00 and a low of Rs. 1470.55 the previous day.
One stock of Container Corporation of India Ltd. was seen to be priced at Rs. 1471.3 while a change of -11.95(-0.81%) points from the previous trade was also observed as last checked on Jan 23, 10:06 A.M.
The volume weighted average price (vwap) was Rs.1483.25 and the bid-ask spread was -0.55 points.
With this a price band of Rs. 1,334.95 – 1,631.55 was also provided by Container Corporation of India Ltd. for the day.
Updated at 9.02 AM
Yesterday, Container Corporation of India Ltd. stock closed at Rs. 1483.25 while touching a maximum of Rs. 1500.00 which was 23.3 points more than the opening price.
Also, the lowest price which was Rs. 1470.55 went 6.15 points lower than the opening price.
As the trading hours came to an end, the last volume was of 562,403 stocks while the 5 day average volume was 422,278 , the 10 day average volume was of 509,840 stocks and the 30 day average volume was of 301,843 stocks.
The 5 day average volume rose 26149 stocks, 10 day average volume rose 32697 stocks and 30 day average volume rose 6195 stocks when compared to the previous day’s values.