Blumont Group Ltd (SGX:A33): Does The -121.24% Earnings Drop Reflect A Longer Term Trend?

After looking at Blumont Group Ltd’s (SGX:A33) latest earnings update (31 December 2017), I found it helpful to revisit the company’s performance in the past couple of years and compare this against the latest numbers. As a long-term investor I tend to focus on earnings trend, rather than a single number at one point in time. Also, comparing it against an industry benchmark to understand whether it outperformed, or is simply riding an industry wave, is an important aspect. In this article I briefly touch on my key findings. Check out our latest analysis for Blumont Group

Was A33’s recent earnings decline worse than the long-term trend and the industry?

I use data from the most recent 12 months, which annualizes the most recent half-year data, or in some cases, the latest annual report is already the most recent financial year data. This allows me to examine various companies on a similar basis, using the latest information. For Blumont Group, its latest trailing-twelve-month earnings is -S$1.05M, which compared to the previous year’s level, has turned from positive to negative. Since these figures are fairly short-term thinking, I have calculated an annualized five-year figure for Blumont Group’s net income, which stands at -S$17.27M. This means even though net income is negative, it has become less negative over the years.

We can further evaluate Blumont Group’s loss by looking at what the industry has been experiencing over the past few years. Each year, for the past five years Blumont Group has seen an annual decline in revenue of -16.06%, on average. This adverse movement is a driver of the company’s inability to reach breakeven. Has the entire industry experienced this headwind? Scanning growth from a sector-level, the SG commercial services industry has been growing, albeit, at a unexciting single-digit rate of 7.42% over the prior twelve months, and 3.06% over the past five. This means that any tailwind the industry is benefiting from, Blumont Group has not been able to gain as much as its industry peers.

What does this mean?

Blumont Group’s track record can be a valuable insight into its earnings performance, but it certainly doesn’t tell the whole story. With companies that are currently loss-making, it is always difficult to predict what will happen in the future and when. The most insightful step is to examine company-specific issues Blumont Group may be facing and whether management guidance has dependably been met in the past. I suggest you continue to research Blumont Group to get a more holistic view of the stock by looking at:

• 1. Financial Health: Is A33’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.
• 2. Valuation: What is A33 worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether A33 is currently mispriced by the market.
• 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 2017. This may not be consistent with full year annual report figures.