After looking at Wilmar International Limited’s (SGX:F34) latest earnings update (31 March 2018), 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. See our latest analysis for Wilmar International
Did F34 perform better than its track record and industry?F34’s trailing twelve-month earnings (from 31 March 2018) of S$1.08b has increased by 0.54% compared to the previous year. Furthermore, this one-year growth rate has exceeded its 5-year annual growth average of -4.92%, indicating the rate at which F34 is growing has accelerated. What’s the driver of this growth? Let’s see if it is merely a result of industry tailwinds, or if Wilmar International has seen some company-specific growth.
Even though both top-line and bottom-line growth rates in the last couple of years were on average negative, earnings were more so. While this brought about a margin contraction, it has lessened Wilmar International’s earnings contraction. Scanning growth from a sector-level, the SG food industry has been enduring some headwinds over the past twelve months, leading to an average earnings drop of -10.89%. This is a major change, given that the industry has been delivering a positive rate of 3.15%, on average, over the past five years. This means whatever near-term headwind the industry is experiencing, Wilmar International is less exposed compared to its peers.In terms of returns from investment, Wilmar International has not invested its equity funds well, leading to a 6.72% return on equity (ROE), below the sensible minimum of 20%. Furthermore, its return on assets (ROA) of 2.59% is below the SG Food industry of 3.30%, indicating Wilmar International’s are utilized less efficiently. However, its return on capital (ROC), which also accounts for Wilmar International’s debt level, has increased over the past 3 years from 6.89% to 6.91%. This correlates with a decrease in debt holding, with debt-to-equity ratio declining from 152.19% to 121.75% over the past 5 years.
What does this mean?
While past data is useful, it doesn’t tell the whole story. Recent positive growth isn’t always indicative of a continued optimistic outlook. I recommend you continue to research Wilmar International to get a better picture of the stock by looking at:
- Future Outlook: What are well-informed industry analysts predicting for F34’s future growth? Take a look at our free research report of analyst consensus for F34’s outlook.
- Financial Health: Is F34’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.