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Profitability Analysis: of The Company For Three Years (ROE, ROA, EPS, Dividend, Payout Ratio Etc.)
Profitability Analysis: of The Company For Three Years (ROE, ROA, EPS, Dividend, Payout Ratio Etc.)
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Index
• Company Profile
• Profitability Analysis
• Competitor Analysis of two competitor
• Leverage Analysis
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Company Profile
Vision of the Company:- They are committed to following the triple bottom line
philosophy of ‘People, Planet and Profit’, with a commitment to providing more modern homes,
workplaces and social infrastructure to the nation.
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Management of the Company:- Their Board of Directors are,
Name Designation
Arun Nanda Chairman
Bharat Shah Director
Ameet Hariani Director
Sangeeta Prasad Managing Director & CEO
Anish Shah Director
Amrita Chowdhury Ind. Non-Executive Director
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Profitability Analysis
Return on Equity:- The Return On Equity ratio essentially measures the rate of return that the
owners of common stock of a company receive on their shareholdings. Return on equity signifies
how good the company is in generating returns on the investment it received from its
shareholders.
Formula:- Profit/Loss after Tax ÷ Shareholder’s Fund*100
Calculation:- All figures are in crores
FY 2019 2018 2017
Profit/Loss After Tax 58.59 53.12 48.94
Shareholder’s Fund 1751.31 1805.64 1492.80
ROE 3.34 2.94 3.27
Interpretation:- From the year 2017 the ROE(Return on Equity) decreased upto the next
financial year 2018, ie, from 3.27 & to 2.94 % this significant decrease indicates that the
company is unable to make the profit, it also indicates that the company have not allocates its
shareholder fund properly.
From financial year 2018 to 2019 we can see a slight improvement which indicates that the
company management have made good decisions in investing on productive asset and here the
shareholders.
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Earning Per Share:- Earnings per share or EPS is an important financial measure, which
indicates the profitability of a company. It is calculated by dividing the company’s net income
with its total number of outstanding shares. It is a tool that market participants use frequently to
gauge the profitability of a company before buying its shares.
Formula:- Net Profit After Tax – Preference Dividend ÷ Number of Equity Share
Calculation:- All figures are in crores
FY 2019 2018 2017
Net Profit After Tax 58.59 53.12 48.94
Preference Dividend
0.00 0.00 0.00
Number of Equity
5.135 5.133 4.105
Share
EPS 11.40 10.34 11.92
Interpretation:- EPS Shows how much money a company makes for each share of its stock. A
company with high earning per share ratio is capable of generating a significant dividend for
investor. In this company we can see that from financial year 2017 the EPS decreased up to the
next financial year 2018 from 11.92 % to !0.34 %.We know that higher EPS indicates more
value because investor will pay more for a company with higher profits. But here its decreasing.
A negative EPS tells that exactly that much money the company lost per share outstanding stock.
In case of financial year 2018 to 2019 this EPS increasing from 10.34 % to 11.40 % that means
they are generating good amount of profit and it’s a good sign for investor when choosing to
invest in that company.
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Return on Asset:- Return on assets (ROA) is an indicator of how profitable a company is
relative to its total assets. ROA gives a manager, investor, or analyst an idea as to how efficient a
company's management is at using its assets to generate earnings. Return on assets is displayed
as a percentage.
Formula:- Net Income ÷ Total Assets*100
Calculation:- All figures are in crores
FY 2019 2018 2017
Net Income 58.59 53.12 48.94
Total Asset 1870.86 1973.68 1881.59
ROA 1.04 2.69 2.60
Interpretation:- The return on assets (ROA) shows the percentage of how profitable a
company's assets are in generating revenue.ROA over 5% are generally considered good. In this
case FY 2017 the ROA increased up to the next FY 2018 from 2.60 % to 2.69 % .Its means the
business gains more money than it brings in and experiences a net gain. This is usually a very
good sign for investors. From FY 2018 to FY 2019 we can see a that it decrease slightly from
2.69 % to 1.04 %. Its indicates that currently the company is not making enough income from the
use of its assets.The machinery may not be increasing production efficiency or lowering overall
production costs enough to positively impact the company's profit margin.
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Dividend Payout Ratio:- The dividend payout ratio is the ratio of the total amount of dividends
paid out to shareholders relative to the net income of the company. It is the percentage of
earnings paid to shareholders in dividends. The amount that is not paid to shareholders is
retained by the company to pay off debt or to reinvest in core operations. It is sometimes simply
referred to as the 'payout ratio.
Formula:- Dividend Per Share ÷ Earning Per Share
Calculation:- All figures are in crores
FY 2019 2018 2017
Dividend Per Share 6.00 6.00 6.00
Earning Per Share 11.41 10.35 11.92
Dividend Payout 0.52 0.57 0.50
Ratio
Interpretation:- A range of 35% to 55% is considered healthy and appropriate from a dividend
investor’s point of view. A company that is likely to distribute roughly half of its earnings as
dividends means that the company is well established and a leader in its industry. But is case of
Supreme Infrastructure we see that the financial year 2017 to 2019 .The whole 3 years there
Dividend Payout Ratio is 0.50, 0.57,0.52%. Its means the company is suspendingits dividend,
When its suspend its dividend then dividend payout ratio automatically become 0%. That's
because the payout depends on a security's price and dividend. If the company suspends its
dividend, it essentially becomes a non-dividend-paying stock.
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Return on Investment:- Return on Investment (ROI) is a performance measure used to evaluate
the efficiency of an investment or compare the efficiency of a number of different investments.
ROI tries to directly measure the amount of return on a particular investment, relative to the
investment’s cost. To calculate ROI, the benefit (or return) of an investment is divided by the
cost of the investment. The result is expressed as a percentage or a ratio.
Formula:- Profit Before Interest and Tax ÷ Capital Employed*100
Calculation:- All figures are in crores
FY 2019 2018 2017
Profit Before Interest
and Tax 89.28 114.19 103.2
Interpretation:- ROI of this company has declined from the FY 2017 to FY 2019 was 3.02 % to
2.98, 2.43 %. This indicates that the company is performing poor in generating profits form its
investment. The ratios are continually in low figures which indicates that in the companies
investments are producing losses as total cost has exceeded total returns and which returns will
fail to attract investors for investments as a investors will avoid a company with negative ROI.
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Price Earning Ratio:- The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company
that measures its current share price relative to its per-share earnings (EPS). The price-to-
earnings ratio is also sometimes known as the price multiple or the earnings multiple.
Formula:- Market Price per Equity Share ÷ Earning Per Share
Calculation:- All figures are in crores
FY 2019 2018 2017
Market Price per 10.00 10.00 10.00
Equity Share
Earning Per Share 11.41 10.35 11.92
P/E Ratio 0.87 0.96 0.83
Interpretation:-
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Competitor Analysis of two competitor
Mahindra Life vs Sanghi Ind
➢ Return on Investment
Mahindra Life
FY 2019 2018 2017
Profit Before 89.28 114.19 103.2
Interest and Tax
Capital Employed 3673.51 3830.66 3415.42
ROI 2.43 2.98 3.02
Sanghi Ind
FY 2019 2018 2017
Profit Before 109.81 165.48 62.97
Interest and Tax
Capital Employed 4307.66 4160.59 2034.77
ROI 2.54 3.97 3.09
Interpretation:- ROI of Mahindra Life has declined from the FY 2017 to FY 2019 was
3.02 % to 2.43 %. This indicates that the company is performing poor in generating
profits form its investment .Where in Sanghi ind the ROI has decreased and from the
FY 2018 to FY 2019 was 3.97 % to 2.54 % . For the Mahindra Life FY 2017 to FY 2018
was 3.02% to 2.98 %. That can be said same for both year. Means their generating
profits to investment is same as financial year 2017-18.Where as Sanghi Ind there ROI in
the FY 2017 to 2018 was 3.09% to 2.54%. we can see that sanghi ind is performing better
than Mahindra life
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➢ Return on Equity
Mahindra Life
FY 2019 2018 2017
Profit/Loss After Tax 58.59 53.12 48.94
Shareholder’s Fund 1,751.31 1,805.64 1,492.80
ROE 3.34 2.94 3.27
Sanghi Ind
FY 2019 2018 2017
Profit/Loss After
52.60 93.31 63.14
Tax
Shareholder’s Fund 1,650.36 1,597.88 1,113.98
ROE 3.18 5.83 5.66
Interpretation:- ROE of Mahindra Life has decreased from the FY 2017 to FY 2018 like
3.27% to 2.94 % .But the FY 2019 the figures are become positive 3.34 % .Where as in case of
Sanghi Ind after the FY 2017 to FY 2018 the ROE has slightly increased and in the FY 2019 the
company’s ROE was again declined 3.18%. This indicates that Supreme Mahindra Life is
performing better when it comes to allocation of its shareholders fund even though it is declining
but when compared to Sanghi Ind which have its ROE is less then Mahindra LIfe .Which
indicates that Sanghi Ind is generating less profits and the shareholders are not satisfy and
eventually will take their money out of the company Mahindra is performing better
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➢ P/E Ratio
Mahindra Life
FY 2019 2018 2017
Market Price per 10.00 10.00 10.00
Equity Share
Earning Per Share 11.41 10.35 11.92
P/E Ratio 0.87 0.96 0.83
Sanghi Ind
FY 2019 2018 2017
Market Price per
10.00 10.00 10.00
Equity Share
Earning Per Share 2.10 3.72 2.87
P/E Ratio 4.76 2.68 3.48
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Leverage Analysis
Financial Leverage:- Financial leverage which is also known as leverage or trading on equity,
refers to the use of debt to acquire additional assets.The use of financial leverage to control a
greater amount of assets (by borrowing money) will cause the returns on the owner's cash
investment to be amplified.
Interpretation:- A figure of 0.5 or less is Ideal.No more than half of the company’s assets
should be financed by debt.From the FY 2017 to FY 2018 the companies financial leverage
decreased from 0.017 to 0.0004 .Which indicates that the company is using lower debts to
finance its assets and operations still it is generating enough revenue to grow its assets from
profit. From FY 2018 to FY 2019 the financial leverage decreased up to from 0.0004 to 0.003
.Which indicates that the company is in a very good position where it is using lesser debts and
generating enough revenue for its operations and assets from it.This ratio here indicates that the
company is in very good position and have achieved the capability to expand its fixed assets
from revenues it is generating even if it is using debt.
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Degree of Financial Levarage:- A degree of financial leverage (DFL) is a leverage ratio that
measures the sensitivity of a company’s earnings per share (EPS) to fluctuations in its operating
income, as a result of changes in its capital structure. The degree of financial leverage (DFL)
measures the percentage change in EPS for a unit change in operating income, also known as
earnings before interest and taxes (EBIT).
Formula:- EBIT ÷ EBIT- Interest
Calculation:- All figures are in crores
FY 2019 2018 2017
EBIT 3.83 5.76 3.96
Interest 5.48 35.41 31.97
DFL -0.43 -5.14 0.03
Interpretation:- From FY 2017 to 2018 the DFL or Degree of financial leverage has decreased
from 0.03 to -5.14 .This decrease in figures indicates that the profitability of company is more
stable and less sensitive . Which means even small change in the leverage will directly effect the
profitability of the company.The sensitivity of the net income to the fluctuations in the operating
income is low which signifies that the company is less vulnerable. From FY 2018 to 2019 the
DFL has increased from -5.14 to -0.43 this increase in DFL indicates that the company now is
very volatile and fluctuating. Lower DFL is a positive sign for the company as there will be less
debt in the company’s capital structure.
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