In this article, I will take a look at Sheng Siong Group Ltd’s (SGX:OV8) most recent earnings update (31 March 2019) and compare these latest figures against its performance over the past few years, along with how the rest of OV8’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.
Did OV8’s recent earnings growth beat the long-term trend and the industry?
OV8’s trailing twelve-month earnings (from 31 March 2019) of S$72m has increased by 1.3% compared to the previous year.
However, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 11%, indicating the rate at which OV8 is growing has slowed down. What could be happening here? Well, let’s look at what’s occurring with margins and if the entire industry is feeling the heat.
In terms of returns from investment, Sheng Siong Group has invested its equity funds well leading to a 23% return on equity (ROE), above the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 15% exceeds the SG Consumer Retailing industry of 4.2%, indicating Sheng Siong Group has used its assets more efficiently. However, its return on capital (ROC), which also accounts for Sheng Siong Group’s debt level, has declined over the past 3 years from 26% to 25%.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Companies that have performed well in the past, such as Sheng Siong Group gives investors conviction. However, the next step would be to assess whether the future looks as optimistic. You should continue to research Sheng Siong Group to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for OV8’s future growth? Take a look at our free research report of analyst consensus for OV8’s outlook.
- Financial Health: Are OV8’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.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
NB: Figures in this article are calculated using data from the trailing twelve months from 31 March 2019. This may not be consistent with full year annual report figures.
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