Was Frencken Group Limited’s (SGX:E28) Earnings Decline Part Of A Broader Industry Downturn?

When Frencken Group Limited’s (SGX:E28) announced its latest earnings (31 December 2018), I wanted to understand how these figures stacked up against its past performance. The two benchmarks I used were Frencken Group’s average earnings over the past couple of years, and its industry performance. These are useful yardsticks to help me gauge whether or not E28 actually performed well. Below is a quick commentary on how I see E28 has performed.

See our latest analysis for Frencken Group

Commentary On E28’s Past Performance

E28’s trailing twelve-month earnings (from 31 December 2018) of S$30m has declined by -9.3% compared to the previous year.

Furthermore, this one-year growth rate has been lower than its average earnings growth rate over the past 5 years of 19%, indicating the rate at which E28 is growing has slowed down. Why could this be happening? Well, let’s look at what’s going on with margins and if the whole industry is experiencing the hit as well.

SGX:E28 Income Statement, March 18th 2019
SGX:E28 Income Statement, March 18th 2019

In terms of returns from investment, Frencken Group has fallen short of achieving a 20% return on equity (ROE), recording 11% instead. However, its return on assets (ROA) of 6.7% exceeds the SG Machinery industry of 4.8%, indicating Frencken Group has used its assets more efficiently. And finally, its return on capital (ROC), which also accounts for Frencken Group’s debt level, has increased over the past 3 years from 7.2% to 15%.

What does this mean?

Frencken Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. Companies that are profitable, but have volatile earnings, can have many factors influencing its business. You should continue to research Frencken Group to get a more holistic view of the stock by looking at:

  1. Future Outlook: What are well-informed industry analysts predicting for E28’s future growth? Take a look at our free research report of analyst consensus for E28’s outlook.
  2. Financial Health: Are E28’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.
  3. 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 December 2018. This may not be consistent with full year annual report figures.

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