Entering text into the input field will update the search result below

Eros International: No Positive Signs

Innovative Investor profile picture
Innovative Investor


  • Eros International Plc. is facing a declining cash flow issue along with growth in operating expenses.
  • Intense competition and unattractive movie library are adding to the problems that the company is already facing.
  • There are no immediate signs of turnaround from its current fortunes.

Eros International Plc. (EROS) is a Mumbai-based company that specializes in the production and distribution of movies and music. Since its founding in the 1970s, Eros has emerged as a leading entertainment company in India and the wider East Asia region with a library of more than 12,000 titles. Besides distributing its content through conventional methods like theaters, Eros also launched Eros Now, which is an on-demand platform similar to what is offered by Netflix (NFLX) and other rivals. Nevertheless, intense rivalry has seen Eros’ fortunes decline significantly since 2017; five years since the launch of Eros Now. A subsequent evaluation of the company’s key financial metrics thus informs a sell suggestion.

Profit Margin

Figure 1 shows that Eros’ net profit margin has declined sharply from 4.53% recorded in 2017 to 2019’s loss of 151.95%. During this period, the company’s gross profits grew from $88.8 million in 2017 to $114.7 million in 2019. This infers prudent management of direct costs, efforts to market new films, and generate income from Eros’ diverse library. However, Eros recognized a $423.3 million impairment loss in 2019 that was attributed to the economic unviability of its library. This was caused by a change in market conditions, namely intensified competition, and technology. While the impairment loss is an exceptional item, it highlights the conditions to which Eros is subject. Other notable contributors to the company’s loss position include a $23.8 and $4.6 million growth in administrative and finance costs respectively. These indicate a decline in economies of scale where costs rise faster than revenues as an entity expands. They also highlight a growing appetite for debt. These conditions have become worse in the most recent quarter where Eros saw its revenues decline by 39% and net incomes by 687% as shown in Table 1.

Figure 1: Growth

This article was written by

Innovative Investor profile picture
Investors with great interest in deep value opportunities. "Through this Seeking Alpha account two contributors publish articles".

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (6)

well, it turned out this guy was right ;)
Many of the “facts” presented in the article are downright false. Nice try though.
Finsight Funds profile picture
This is only an income statement analysis. It says nothing of the reasons why the numbers are moving as they do.

For example, did you know Eros released way fewer movies this quarter than last quarter, and that is why the revenue is down?
Do you know why they released fewer movies?
Finsight Funds profile picture
I believe mgmt has been talking about shifting expenses toward Eros Now and OTT media rather than theater releases.

F/D: no position
Finsight Funds profile picture
There's also just variability in their quarter-to-quarter releases. But it's also b/c of the reason below.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.